The 2026 Indian Auto Revolution: New Emission, Fuel and Scrappage Rules That Will Raise Prices

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Upcoming Vehicle Regulations: What Drivers Need to Know

Meaningful changes are on the horizon for vehicle owners and the automotive industry in the coming years. New regulations focused on vehicle safety, emissions, and scrappage policies will impact everything from the price of a new car to the fate of older diesel vehicles. This report details the key updates scheduled to take effect between 2025 and 2027, offering drivers and industry professionals a clear understanding of what to expect.

ELV Rules and Scrappage Incentives

Starting April 1, 2025, the End-of-Life Vehicle (ELV) rules will mandate the scrapping of vehicles deemed unfit for the road. To incentivize responsible vehicle disposal, a 5% discount will be offered on the purchase of a new vehicle when trading in an older one through a Registered Vehicle Scrapping Facility (RVSF).This initiative aims to remove polluting vehicles from circulation and promote a circular economy for automotive materials.

Increased Vehicle Costs

January 1, 2026, will see price increases across most car and motorcycle models, estimated in the range of 2-3%. This is influenced by rising material costs, especially steel, and the implementation of enhanced safety standards, including the mandatory inclusion of Anti-lock Braking Systems (ABS) on all two-wheelers, even those with smaller engine capacities like 100cc bikes. According to a recent report from the Society of Indian Automobile Manufacturers (SIAM), material costs have risen by an average of 4% in the last year alone, contributing to the need for price adjustments.

Mandatory ABS for Two-Wheelers

Also effective January 1, 2026, all new motorcycles, regardless of engine size, will be required to include ABS technology. This safety feature prevents wheel locking during braking, substantially reducing stopping distances and improving vehicle control. The move aligns with global safety standards and aims to decrease the number of two-wheeler accidents, which account for a substantial portion of road fatalities.

CAFE III Emissions Standards

april 1, 2027, marks the implementation of CAFE (Corporate average Fuel Efficiency

How will the 2026 BS‑VII emission norms and E20 fuel rollout affect vehicle prices in India?

The 2026 Indian Auto Revolution: New Emission, Fuel and Scrappage Rules that Will raise Prices

The Indian automotive landscape is bracing for a notable overhaul in 2026, driven by stringent new regulations concerning vehicle emissions, fuel standards, and vehicle scrappage. These changes, while aimed at improving air quality and promoting a lasting automotive ecosystem, are inevitably going to translate into higher vehicle prices for consumers. Let’s break down the key changes and what they mean for you.

Phase II of BS-VII Emission Norms: A Leap Towards Cleaner Air

India is skipping BS-VI altogether and moving directly to a more aggressive Phase II of BS-VII emission standards in 2026. This isn’t simply a tightening of existing rules; it’s a fundamental shift in how vehicles are engineered.

* Real Driving Emissions (RDE): A core component of BS-VII is the implementation of RDE testing. Unlike lab-based tests,RDE assesses emissions while the vehicle is driven on public roads,providing a more realistic picture of its environmental impact. This means manufacturers will need to invest heavily in technologies to control emissions under real-world driving conditions.

* On-Board Diagnostics (OBD): Enhanced OBD systems will be mandatory, continuously monitoring emission control systems and alerting drivers to any malfunctions. This ensures vehicles remain compliant throughout their lifespan.

* Impact on Engine Technology: Expect to see increased adoption of technologies like Gasoline Particulate Filters (GPFs) in petrol engines and more sophisticated Selective Catalytic Reduction (SCR) systems in diesel vehicles. These components add to the manufacturing cost.

E20 Fuel rollout & flex-Fuel Vehicles: The Ethanol Push

The Indian government is aggressively promoting the use of ethanol-blended fuels, with a target of E20 (20% ethanol, 80% gasoline) being available across the country by 2026. This initiative aims to reduce reliance on imported crude oil and lower carbon emissions.

* E20 Compatibility: All new vehicles manufactured from April 1, 2026, will be required to be E20-compliant. This necessitates modifications to fuel systems, engine components, and materials to withstand the corrosive effects of higher ethanol content.

* Flex-Fuel Vehicles (FFVs): FFVs, capable of running on any blend of gasoline and ethanol up to 85%, are gaining traction. While not mandatory for all, their adoption is expected to increase, offering consumers more fuel choice. Maruti Suzuki has already begun testing FFV prototypes.

* Cost Implications: Adapting engines and fuel systems for E20 and FFV compatibility adds to the production cost, which will likely be passed on to consumers.

The Vehicle Scrappage Policy: Incentivizing Renewal

The Vehicle Scrappage Policy,officially launched in 2021,gains significant momentum in 2026 with stricter enforcement and expanded incentives. The policy aims to remove older, polluting vehicles from the roads and encourage the purchase of newer, safer, and more fuel-efficient models.

* Age Criteria: Vehicles older than 15 years (for passenger vehicles) and 10 years (for commercial vehicles) are eligible for scrappage.

* scrappage Value & Incentives: Owners receive a scrappage value for their old vehicle, and manufacturers are offering discounts on new vehicle purchases when a scrapped vehicle is presented. These incentives are designed to offset some of the cost of upgrading.

* Fitness testing: vehicles will undergo mandatory fitness testing at designated centers to assess their roadworthiness. Those failing the test will be deemed unfit for continued use.

* Impact on Used car Market: The policy is expected to disrupt the used car market, perhaps lowering the resale value of older vehicles.

How These Changes Will Affect Vehicle Prices

The combined affect of these regulations is projected to lead to a noticeable increase in vehicle prices across all segments.

* Small Cars: Expect a price hike of approximately 5-10% due to the cost of implementing BS-VII compliant engines and E20 compatibility.

* Mid-Size & Premium Cars: The price increase could be in the range of 8-15%, as these vehicles frequently enough incorporate more complex emission control technologies.

* SUVs & Commercial Vehicles: These segments may see the highest price increases, potentially exceeding 15%, due to the larger engine sizes and more stringent emission requirements.

* Electric Vehicles (EVs): While EVs are exempt from these specific regulations, the overall increase in the cost of traditional vehicles could make EVs more attractive to consumers, potentially driving up demand and, eventually, prices.

What Can Consumers do?

Navigating this changing automotive landscape requires proactive planning.

* Advance Your Purchase: If you’re planning to buy a new vehicle, consider purchasing it before April 1, 2026, to avoid the price increases.

* Explore Financing Options: With higher vehicle prices, explore various financing options, including loans and leasing, to make your purchase more affordable.

* Consider Fuel Efficiency: Prioritize fuel-efficient vehicles, especially those compatible with E20 fuel, to minimize running costs.

* Evaluate Scrappage Benefits: If you own an older vehicle, assess its scrappage value and the incentives offered by manufacturers before making a decision.

* Stay Informed: Keep abreast of the latest developments in automotive regulations and policies to make informed choices.

Case study: Maruti Suzuki’s Proactive Approach

maruti Suzuki, India’s largest passenger vehicle manufacturer, has been actively preparing for