Corporate Average Fuel Consumption (CAFC)

Corporate Average Fuel Consumption (CAFC) refers to the weighted average fuel consumption figure calculated based on the fuel efficiency and corresponding production volume of all passenger car models manufactured in or imported into China by an automaker. It serves as a key regulatory benchmark for authorities to evaluate an automaker's overall fleet efficiency and drive industry-wide energy conservation. In layman's terms, regulators assess not just whether an individual car model is fuel-efficient, but whether the average fuel consumption across the brand's entire fleet meets statutory targets.

Calculation Method

The CAFC calculation formula multiplies the fuel consumption of each vehicle model by its annual production (or import) volume, sums these figures, and divides the total by the aggregate production (or import) volume. Fuel consumption figures are determined under the national testing standard (GB/T 19233), which currently adopts the Worldwide Harmonised Light Vehicles Test Cycle (WLTC). Models across different powertrain types (petrol, diesel, fully electric, plug-in hybrid, etc.) are converted into a standardised petrol equivalent for unified comparison.

To accelerate the transition to electrification, regulatory policy incorporates a production multiplier incentive for New Energy Vehicles (NEVs) within the CAFC formula. Under this mechanism, each NEV is counted as multiple units in the calculation denominator, effectively lowering the automaker's fleet-wide weighted average fuel consumption. This multiplier incentive is gradually scaled down year by year as NEV market adoption rises, until it is phased out entirely.

Policy Framework and Industry Impact

The CAFC system serves as the cornerstone of China's Dual-Credit policy framework. By enforcing progressively stricter annual CAFC targets, the policy imposes rigid compliance demands on carmakers—achieving an actual fleet average below the target generates positive credits, whereas exceeding the target results in negative credits (deficits). Any accumulated negative credits must be offset by carried-forward positive credits, transfers from affiliated entities, or by purchasing NEV credits; failure to clear these deficits results in regulatory restrictions, including homologation and production halts on high-fuel-consumption models.

The underlying logic of this framework is to impose higher compliance costs on high-consumption models while rewarding fuel-efficient and New Energy Vehicles, establishing a market-driven incentive structure for decarbonisation. For automakers, CAFC compliance is not merely a regulatory bottom line, but a key driver of long-term product planning—over-reliance on large-displacement, high-consumption models leads to escalating compliance penalties. In response to tightening targets, mainstream automakers are driving down fleet fuel consumption through hybridisation, vehicle lightweighting, and high-efficiency powertrain engineering, while accelerating NEV roll-outs to capitalise on multiplier credits and advance towards low-carbon mobility.