Malaysia will enforce minimum fuel economy for each manufacturer, calculated based on their weight of their models, by year 2030. Details are still under deliberation, but we understand that the Ministry of International Trade and Industry (MITI) and automotive policy think tank MARii will share some preliminary information later this month.

Corporate Average Fuel Economy, better known as CAFE, is used to set maximum allowable fuel consumption (or minimum fuel economy targets) for a vehicle manufacturer / model. The goal is to force manufacturers to sell more lower priced, fuel-efficient models. Depending on country, this can either be a voluntary measure, or tied to financial penalties if the target is not achieved.

CAFE was first introduced in the US in the ‘70s but few manufacturers paid attention to it until the late 2010s, when targets were tightened.

Even developing India has implemented its own CAFE standards in 2022. Come 1-April 2023, the results will be tallied and some manufacturers are expected to pay hefty fines for not meeting the minimum target.

In Europe, their CAFE standards are more complex as the given targets take into consideration a manufacturer's sales mix ratio. If a manufacturer wants to sell one high powered, fuel thirsty SUV, then it needs to sell 10 more fuel sipping hybrids or 5 battery EVs to offset the former, for example.

Maintaining this balance is very difficult because consumers have a strong preference for large SUVs.

Introducing additional fuel saving technologies will inevitably lead to an increase in prices and small cars, which already have very thin profit margins, don’t have a lot of elasticity in their pricing. If prices of fuel saving small cars go up, how are manufacturers going to sell more of them to offset sales of their larger, higher profit models that fund the development of their high sales volume small cars? Damn if you do, damn if you don’t.

The good news is that from what we’ve gathered, Malaysia’s CAFE standards will be less complicated, and will be based on Japan’s 2030 CAFE targets outlined by their Ministry of Economy, Trade, and Industry (METI) - Japan’s equivalent to our MITI.

Japan’s CAFE is a lot simpler, probably because more than 60 percent of cars sold in Japan are kei minicars so unlike Germany or USA, there’s no need to make things unnecessarily complicated by thinking too much about calculating median weight of the cars each manufacturer sold last year.

Instead, manufacturers only need to refer to a chart given by METI. The fuel economy target is given on a vehicle model level, depending on the vehicle’s weight.

Also read: A darling with Malaysian recond dealers, Honda N-Box is Japan's best-selling car of 2022

In Europe and India, CAFE standards are also tied to CO2 emission caps. Whether this will be adopted in Malaysia is still unclear, but from what we’ve gathered, this is not part of the plan for 2030.

We first got hint of the incoming CAFE standard when it was mentioned in passing during Perodua’s 2023 business outlook last week.

An accompanying president slide shown by President and CEO Dato’ Sri Zainal Abidin Ahmad mentioned a 4.2-litre CAFE target by 2030.

When asked to elaborate further, the CEO said this was the target given to Perodua, and that the company’s future product plans is made with this in mind, referring to the company’s planned hybrid model introduction in 2024.

Checks with Proton’s Deputy CEO Roslan Abdullah also confirmed the same (preliminary) understanding of CAFE.

In tandem with the CAFE target is the government’s goal of having 9 percent of total new car sales (TIV) to be contributed by electried vehicles xEVs (including HEVs, or hybrids), by year 2025. This figure is to be increased on 15 percent by 2030.

Also read: Perodua: EVs to overtake ICEs and hybrids in Malaysia by early 2030s - 17 suppliers may not survive the transition

As mentioned earlier, details on implementation timeline, calculation methodology, and penalties (or rewards?) have yet to be announced.

The intention of introducing CAFE is a noble one, because the MITI Minister Tengku Zafrul cannot be talking about promoting Malaysia as a regional hub for EVs, or promote low carbon mobility while at the same time spending RM 30 billion on subsidies for petrol and diesel.

However, there is a pressing matter that MITI needs to answer - fuel quality and emission standards.

How is Malaysia going to implement CAFE, which implies newer generation engines that require cleaner fuels, when our fuel quality is still at Euro 4M for petrol, and Euro 5 for diesel? Our neighbours Thailand and Singapore moved on to Euro 6.

Also, while fuel standards have moved up, our emission standard is still stuck at Euro 2. There is also no proper road map for CO2 emission standard. You cannot talk about CAFE without having these basics in place.

Even India is using Euro 6 equivalent (Bharat Stage 6) standards for both fuel quality and exhaust emission.

In Europe, CAFE targets have a carrot-and-stick element to it. Exceed it and you will be rewarded with carbon credits. Miss it and there will be hefty financial penalties. Will such measures be made available for Malaysia’s CAFE?

Also, which fuel consumption test method will be used? MARii has previously proposed for the Malaysia Driving Cycle (MDC) but this is silly because the whole world is moving towards a single WTLP (also called WLTC) test cycle.

Insisting on our own method would mean re-doing the tests that their manufacturing principals have already done, and the local distributors / importers are supposed to pay for this? Why should they when they already have the WLTP result that is recognized by the United Nations?

In Malaysia, there is only one lab that is certified to do MDC testing – the National Emission Test Centre (NETC) operated by Perodua.

Good luck in cajoling getting other manufacturers to send their yet-to-be-launched models into a Perodua-owned facility to get their MDC certification.