Wheels in motion: regulatory considerations for Australian automotive investment

Electric, connected and automated vehicles are revolutionizing the Australian automotive sector. As domestic and international companies look to capitalize on emerging opportunities, navigating complex regulations is key to achieving a strategic balance between risk and opportunity.

In the first article in this series, we examined the Australian Government’s proposed framework for regulating automated vehicles on Australian roads. The automated evolution of vehicles is just one aspect of the country’s thriving automotive sector, where electric and connected vehicles are also making significant progress. Investment opportunities exist in various areas, including vehicle imports, software development and service provision across the value chain. Moreover, the new vehicles and related technologies will have a variety of applications across a variety of industries, including logistics, mining, resources and ridesharing, with investment options ranging from direct go-to-market to local partnerships, joint ventures and mergers and acquisitions.

However, Australia’s regulated economy requires strategic planning, risk assessment and mitigation strategies. Compliance with foreign regulations does not guarantee success as investors will need to be familiar with Australian regulations covering, but not limited to, import, export, security, tax, privacy, telecommunications, consumer protection, employment and intellectual property.

Key legal and regulatory issues

1. Corporate structure and project financing

Establishing and registering an entity is crucial for companies investing in Australia, and entities entering the automotive market are no exception.

Certain foreign investments in companies in the automotive or automotive-adjacent industries may require approval from the Foreign Investment Review Board (FIRB), depending on the size and nature of the investment and the ownership structure of the companies.

Some other key issues include:

• establishing an appropriate corporate structure to achieve commercial objectives, taking into account factors such as whether companies will be deemed to be “carrying on business” in Australia, which may result in Australian Securities and Investments Commission (ASIC) registration requirements;

• tax consequences of various corporate structures; AND

• restrictions on capital controls in companies’ home countries and Australia’s project financing and cash flow requirements.

2. Import and export restrictions

Australian import and export restrictions may apply depending on your business type and investment structure.

Importing road vehicles into Australia without an import permit is an offense under s Road Vehicle Standards Act 2018. Businesses planning to import vehicles into Australia must ensure that they obtain the appropriate permits and allow sufficient time to complete the process (including potentially making design changes to the vehicles to comply with Australian design regulations).

Furthermore, Australian sanctions laws may seek to prevent the inflow and outflow of capital from sanctioned persons or companies or from certain countries or regimes. Companies importing or exporting vehicles, components or goods should consider these regulations, including the impact of sanctions on upstream suppliers.

In addition, Australia regulates the export of certain “controlled” goods and technology (which may include some goods and technology used in electric, connected and automated vehicles). From October 2024, export controls will cover “deemed exports” to overseas businesses operating and foreign workers working in Australia (with some exceptions). Companies should assess their compliance with regulations (e.g. whether a license is required to export the relevant goods or technology).

3. Data privacy

Australia’s new Privacy Commissioner recently stated that the collection and processing of personal data by connected vehicles is a key concern for the regulator.

Australia Privacy Act 1988 (Cth) (Privacy Act) are key laws that set out the principles and requirements for the collection, use and disclosure of personal data. It is desirable that companies (among others):

• review and update its publicly available documents (such as privacy policy and collection notices), internal data flows and procedures to improve data management, transparency and accountability;

• consider whether it is proposed to collect any biometric information (such as fingerprints) for the purposes of automatic verification or biometric identification, as the collection, use and disclosure of “sensitive information” is subject to more stringent safeguards; AND

• consider the requirements of the Privacy Act regarding the disclosure of Australians’ personal data overseas (e.g. for global data consolidation and analytics purposes).

Businesses should also keep abreast of privacy developments in Australia as the Privacy Act undergoes significant reform, with draft amendment legislation expected in August 2024. The reform could expand the framework to create new requirements for the collection and use of personal data .

Additionally, companies should consider how Spam Act 2003
(Cth) and recent enforcement actions have an impact on direct marketing of vehicles via commercial electronic messages.

4. Telecommunications

The widespread introduction of connected and automated vehicles on public roads may require significant network upgrades, potentially using “dedicated short-range communications networks” for vehicle-to-vehicle and vehicle-to-infrastructure communications. However, existing telecommunications regulations may not keep pace with vehicle technological advances, leading to potential confusion and coverage gaps.

Some other key issues include:

• whether the business involves the supply of regulated telecommunications services in Australia and, if so, whether obligations under the relevant telecommunications legislation may apply, including licensing requirements for an “operator” or “carriage service provider”; AND

• privacy obligations imposed on licensed carriers and transportation service providers.

5. Consumer protection

Australia has a robust consumer protection framework, including statutory consumer guarantees applicable to consumer contracts for goods and services, and cannot be excluded.

Businesses advertising and selling electric, connected and automated vehicles should ensure that their marketing materials and claims comply with Australian Consumer Law (ACL), avoiding potentially misleading or deceptive claims, given the evolving regulatory framework.

Furthermore, businesses supplying vehicles or related goods to consumers should review their procedures for providing remedies where goods are defective, unfit for a particular purpose or otherwise fail to meet advertised descriptions or demonstrations, including refund, repair or replacement and product recall.

Furthermore, companies using standard contracts with consumers or small businesses should check the fairness of their terms for compliance with the ACL, especially if they plan to use a global, uniform set of terms.

6. Other issues

In addition, companies investing in the Australian automotive sector should consider a number of other key factors in their business plans, including:

• compliance with local labor laws;
• industrial relations;
• health and safety regulations;
• the application of Australian franchising laws to the establishment and operation of dealers in Australia;
• work visa requirements for employing Australian-based employees and contractors; AND
• protection and commercialization of intellectual property assets.

Key conclusions

Australia’s thriving automotive sector offers enormous opportunities, but timely and thorough business planning is essential to capitalize on them. The next key steps for international and domestic companies planning to invest in the automotive sector across the value chain may include:

• Determining a corporate structure commensurate with business plans, strategy and risks, taking into account partnerships, objectives, target customer base and key factors such as tax, employment, insurance, financing and cash flow, as well as approval and registration requirements, procedures and timelines .

• Integrating privacy into the design of products and services, taking into account changing vehicle technologies, cross-border data exchange and individual rights. Solutions should be forward-looking to anticipate and adapt to changing laws and regulatory requirements and be regularly reviewed.

• Reviewing company documents (including standard contracts, terms, conditions, policies and notices) to ensure compliance with Australian privacy and consumer protection laws, making targeted amendments to global documents to balance local requirements with international consistency.

• Allowing sufficient time to plan for compliance with imports, export controls, sanctions and other regulatory issues that are often fact-dependent and require careful assessment to identify practical risks and regulatory priorities.

• Consideration of parallel regulatory developments in Australia, including in relation to artificial intelligence and autonomous technologies.
• Draft and negotiate contracts with local partners carefully to avoid disputes, including clear risk allocation, insurance requirements and effective dispute resolution mechanisms.