3.1 million new electric vehicles ("EVs") were registered worldwide in 2017. This represents an increase of 57% from 2016 and is similar to the growth rate of 60% in 2015 and 2016. Currently, China accounts for around 40% of the global EV fleet while the European Union and the United States each have around 25% of the worldwide total. In particular, Norway is leading the way in introducing EVs with EVs representing a share of 6.4% of vehicles in its stock.
These developments are being driven primarily by a general awareness of the environmental benefits of EVs over internal combustion engine ("ICE") vehicles. EVs emit no tailpipe CO2 and other pollutants such as NOx, NMHC and PM at the point of use and EVs create less noise pollution than ICE vehicles. Government incentives to increase the percentage of EVs on the road have also emerged.
This shift towards electro-mobility requires innovation and cooperation between market players who need to shape this transformation in a successful and legally-sound way.
The following are examples of legal challenges which EV manufacturers may face in Europe.
There are legal requirements for market authorizations for batteries such as registration and labelling provisions. There are also obligations to take the batteries back and to ensure their proper handling at the end of their use in an EV. Further rules regulate the proper handling of batteries in relation to second life usage.
Battery degradation, range, horse-power and acceleration
It is important to ensure that the wording of the vehicle warranty makes it clear that the warranty only covers defects in the vehicle and not normal wear and tear and that degradation in battery capacity over time constitutes normal wear and tear.
An EV manufacturer will need to carefully vet the accuracy of any assurance that it makes in advertising, on websites, brochures or customer-facing materials of any kind in relation to battery capacity and degradation, range, horse-power and acceleration of the EV in order to minimise the risk that customers make legal claims for misrepresentation and breach of contract.
Rollout of a network of charging points
The operator of a network of EV charge points (which could also be an EV manufacturer) will need to locate the charge points subject to general network connection rules, planning law and safety regulations. Typically, the operator leases premises and purchases/ provides for electricity necessary for electricity supply at the charge point. In some countries, the operator may apply for subsidies for the installation of publicly accessible EV charging infrastructure.
The operator will need to consider contractual and liability issues vis-à-vis not only (a) the landlord of the premises on which EV chargers are installed, but also (b) the EV user, and (c) the power producer.
- In relation to the landlord, the operator may agree that the infrastructure that the operator has installed becomes property of the landlord upon termination of the lease. This could be in return for waiving the requirement for the operator to pay rent or share revenue (as the operator's investment in infrastructure constitutes consideration for use of the premises). The parties will need to consider joint PR activities and the joint naming of the station. It will also be necessary to find agreement on the number of parking spaces which will serve as "dedicated" charge posts to be used by certain EVs, and the number of spaces outfitted with charge posts to charge certain EVs but which are also available for general parking, but not charging, of non-EVs for a maximum number of minutes ("enabled" stalls) with signage. The parties will have to settle other contractual terms including those relating to operating costs, maintenance, advertising, non-impairment of the charging station, insurance, assignment of lease rights and indemnifications.
- In relation to the EV user, the operator will need to consider pricing rules such as the requirement under EU Alternative Fuels legislation that the prices charged by the operator of a charge point are reasonable, easily and clearly comparable, transparent and non-discriminatory. Purchasers of EV charging infrastructure should ensure that they receive relevant manufacturer warranties to evidence that equipment has been manufactured to the latest technical standards. An operator may decide to charge idle fees if the EV remains connected to the charger after charging is complete. The legal risk is that any assurance in advertising, on websites, brochures or customer-facing materials of any kind that EV users will be charged for charger use could be used to argue that charging a fee later for idling is (a) a breach of contract i.e. public statements about charging constitute a term of the contract either express, or where generally clear, implied; (b) unfair terms i.e. any express contract term entitling the operator to levy a fee for idling or to increase that fee unilaterally is unfair and unenforceable; (c) a misrepresentation i.e. a statement or ad promising to charge for charging is a statement which induced the customer to use the charger and that introducing idle charging is a breach of that representation entitling the customer to rescind the contract and get the customer's money back. The solution is essentially to regard idle fees as paying for parking. The important threshold for the operator to be able to ask a customer to pay idle fees is that the customer is informed of idle fees before they are incurred (which is similar to reading a sign on parking rates when the customer pulls into a parking lot). The operator could launch a system that prompts customers to make payment by credit card, at which point they will accept terms of service covering idle fees. Customers' credit cards would not be automatically charged for idle fees until they have accepted the terms of service.
- In relation to the power producer, the operator may consider requiring provisions in the Power Purchasing Agreement ("PPA") that enable the operator to terminate the PPA pre-emptively where the after-tax value of electricity changes. It is also important that the PPA includes performance guarantees from the power producer to let the buyer meet demand schedules subject to penalties.
Cancellation provisions in a European Motor Vehicle Purchase Agreement
Increasingly, certain EV manufacturers are selling directly to consumers through distance or off-premises contracts.
In particular, a European Motor Vehicle Purchase Agreement ("MVPA") should ensure that the consumer is given information in correct form and content about the time limit and procedures for exercising the statutory right to withdraw in a distance or off-premises contract (including the model withdrawal form set out in Annex 1(B) of the EU Directive on Consumer Rights ).
This is necessary to ensure that the consumer cannot exercise an extended right to withdraw of 12 months from the end of the initial withdrawal period under legislation implementing the EU Directive on Consumer Rights.
CO2 credit trading
Vehicle manufacturers can group together and act jointly to meet EU emissions targets. This provides an opportunity for EV manufacturers to sell CO2 credits to the pool.
In particular, in forming a pool, manufacturers need to respect competition law. The information they exchange should be limited to average specific emissions of CO2, their specific emissions targets, and their total number of vehicles registered.
EU Right-to-Repair rules
In accordance with the EU Right-to-Repair Regulation, a manufacturer shall provide unrestricted and standardised access to vehicle repair and maintenance information to independent operators. This information shall include an unequivocal vehicle identification; service handbooks; technical manuals; component and diagnosis information (such as minimum and maximum theoretical values for measurements); wiring diagrams; diagnostic trouble codes (including manufacturer specific codes); the software calibration identification number applicable to a vehicle type; information provided concerning, and delivered by means of, proprietary tools and equipment; and data record information and two-directional monitoring and test data.
Manufacturers may charge reasonable and proportionate fees for access to vehicle repair and maintenance information. A fee is considered unreasonable or disproportionate if it discourages access by failing to take into account the extent to which the independent operator uses it.
The EU Right-to-Repair Regulation does not require a manufacturer to make the tools needed perform some of the tasks related to the information listed above. It only requires the manufacturer to make the information listed above available through websites using a standardized format in a readily accessible and prompt manner.
However, if certain tools or software are needed to repair a vehicle and can´t be purchased through other sources than the manufacturer, then a manufacturer's refusal to supply a repairer with these tools or software could be considered a violation of competition law.
Data protection rules
Connected EVs generate huge volumes of data.
The General European Data Protection Regulation regulates the processing of "personal data" i.e. any information that relates to an identified or identifiable living individual.
Different pieces of information, which collected together can lead to the identification of a particular person, also constitute "personal data". This means that any and all data produced for or linked to an individual (emails, correspondence, contracts, reports) could be considered the individual's “personal data” even if, on the face of it, it doesn’t contain anything that could identify a particular individual. This could, for example, include documented discussions with customers about their EV faults.
The data controller will need to divulge such information in response to data access requests by individuals unless that data is rendered anonymous irreversibly in such a way that the individual is not identifiable.
EV manufacturers can take advantage of the opportunities of connected systems by obtaining explicit consent from individuals using "privacy-by-design" solutions which take data privacy requirements into account in the development of automation systems.
Inventions and IP
It is necessary to protect pioneering inventions, such as powerful battery and energy storage technologies, by way of patent protection at the national and international level. Additionally, it is important to be able to enforce patents against any infringers.
When developing new products and processes for electro-mobility, particularly in the area of driver assistance systems and user interfaces for EVs, manufacturers need to consider the increasing number of patents held by others and to tailor their new product with a view to maximising their freedom to operate.
Given the innovative nature of the development of EVs, manufacturers of EVs may consider using the procedure under Article 20 of Directive 2007/46/EC establishing a framework for the approval of motor vehicles and their trailers, and of systems, components and separate technical units intended for such vehicles. This Article 20 procedure provides that EU Member States may, on application by the manufacturer, grant an EC type-approval in respect of a type of system, component or separate technical unit that incorporates technologies or concepts which are incompatible with certain regulatory acts subject to authorisation being granted by the European Commission.
Pending the decision as to whether or not authorisation is granted, the EU Member State may grant a provisional approval, valid only in its territory, in respect of a type of vehicle covered by the exemption sought. Other EU Member States may decide to accept this provisional approval on their territory.
Electromagnetic compatibility ("EMC") legislation
EV Manufacturers should ensure that the type approval for a vehicle covers compliance with all relevant EMC norms for motor vehicles (Directive 2004/104/EC ("the Automotive EMC Directive") and UNECE Regulation No. 10). These norms fully harmonize the relevant EMC requirements.
Compliance with other EMC requirements than the Automotive EMC Directive may be required for after-market equipment unrelated to safety functions intended for installation in vehicles and which are not subject to type approval (electronic sub assembly ("ESA")). For some of the ESA a declaration of conformity with the general EMC Directive 2014/30/EU or the Radio Equipment Directive 2014/53/EU is required.
The general EMC Directive and the Radio Equipment Directive require a declaration of conformity (i.e. testing against the specific harmonized standards referred to in these directives) and a CE marking before the equipment may be placed on the market. These requirements apply to the manufacturer or the importer that places the relevant equipment from a third country on the EU market. In as far as a manufacturer is purchasing equipment from suppliers in the EU, the equipment is supposed to be tested and accompanied by a declaration of conformity that has been obtained by the manufacturer or importer.
In case the manufacturer is the importer of equipment from third countries and only places the equipment on the market after it has been installed in a vehicle, the type approval of the vehicle covers the relevant EMC norms that are required for the placing on the market.
An EV manufacturer may have registration obligations and/or information obligations under the EU REACH chemical substances legislation if the total amount of the chemical substance present in the components imported by the EV manufacturer exceeds 1 tonne per year, and if the substance is intended to be released from the component under normal or reasonably foreseeable conditions of use.
EV manufacturers, importers or dealers who offer new cars on the European market will need to comply with rules for displaying information on energy consumption on new EVs displayed for the purpose of selling or leasing the EVs.
In conclusion, these are just some of the legal issues facing manufacturers of EVs in Europe. Other such issues include:
- Applying for relevant subsidies and ensuring their appropriate use to avoid potential exposure to recovery claims by the funding authorities;
- Handling investigations by market surveillance authorities following EV accidents (especially those involving EV fires);
- Complying with legislation regulating end-of-life vehicles, tires, CE marking, Restriction of use of Hazardous Substances ("RoHS") and Waste Electrical and Electronic Equipment ("WEEE");
- Complying with ISO standards;
- Applying type approval requirements and UNECE Transport Regulations to EVs, and complying with the regulatory framework for autonomous vehicles;
- Concluding contracts such as partnership agreements, joint venture agreements, commercial agreements (e.g. in the context of supply chains), and non-disclosure agreements;
- Handling conformity of production and recall audits, corrective action processes and product recalls;
- Reviewing the application of EU anti-trust laws to selective distribution agreements and to the supply of spare parts for EVs;
- Applying legal rules to EV buy-backs and returns;
- Ensuring online EV sales practices comply with Geo-blocking legislation;
- Contingency planning for different Brexit scenarios;
- Reviewing the application of net neutrality rules to zero-rated mobile services in EVs.