Wheels in motion: regulatory considerations for Australian automotive investments

Electric, connected and automated vehicles are revolutionising Australia's automotive sector. As domestic and international companies seek to capitalise on emerging opportunities, navigating complex regulations is key to striking a strategic balance between risk and opportunity.

In the first article of this series, we examined the Australian Government's proposed framework for regulating automated vehicles on Australian roads. The automated vehicle evolution is just one facet of the country's thriving automotive sector, where electric and connected vehicles are also making significant headway. Investment opportunities exist across various areas, including vehicle importation, software development and the provision of services across the value chain. Moreover, new vehicles and associated technologies will have diverse applications in various industries, including logistics, mining, resources and rideshare sectors, with investment options ranging from direct market entry to local partnerships, joint ventures and mergers and acquisitions.

However, Australia's regulated economy demands strategic planning, risk assessment and mitigation strategies. Compliance with foreign regulations will not guarantee success, as investors will have to navigate Australian regulations spanning imports, exports, safety, tax, privacy, telecommunications, consumer protection, employment and intellectual property (among others).

Key legal and regulatory considerations

1. Corporate structure and project funding

Entity setup and registration are crucial for companies investing in Australia, with automotive sector entrants no exception.

Some foreign investments in automotive or automotive-adjacent businesses may require approval by the Foreign Investment Review Board (FIRB), depending on the size and nature of the investment as well as the companies' ownership structures.

Some other key considerations include:

• the establishment of an appropriate corporate structure to achieve commercial goals, considering factors such as whether the companies will be deemed 'carrying on business' in Australia, which may trigger Australian Securities and Investments Commission (ASIC) registration requirements;
• the tax implications of different corporate structures; and
• capital control restrictions in the companies' home countries and Australia's requirements for project funding and cash flow.

2. Import and export restrictions

Australia's import and export restrictions may apply, depending on the business activities and investment structures.

Importing road vehicles into Australia without an import approval is an offence under the Road Vehicle Standards Act 2018. Companies planning to import vehicles into Australia must ensure that they secure appropriate approvals and allow sufficient time to navigate the process (including potentially making design changes to the vehicles for compliance with the Australian Design Rules).

Moreover, Australia's sanctions laws may operate to prevent capital inflow and outflow from sanctioned individuals or companies, or from certain countries or regimes. Companies importing or exporting vehicles, components or goods should consider these laws, including the impact of sanctions on upstream suppliers.

Further, Australia regulates exports of certain 'controlled' goods and technologies (which may include certain goods and technologies incorporated into electric, connected and automated vehicles). From October 2024, the controls on exports will cover 'deemed exports' to foreign companies operating, and foreign staff working, in Australia (with some exceptions). Companies should assess their regulatory compliance (e.g. if a permit is required to export the relevant goods or technologies).

3. Data privacy

Australia's new Privacy Commissioner has recently flagged the collection and handling of personal information by connected vehicles is a regulatory focus for the regulator.

Australia's Privacy Act 1988 (Cth) (Privacy Act) is the key legislation that sets out the principles and requirements for collecting, using and disclosing personal information. It is desirable for companies to (among other things):

• review and update their public-facing documents (such as privacy policies and collection notices), internal data flow and procedures to enhance data governance, transparency and accountability;
• consider whether any biometric information is proposed to be collected (such as fingerprints) for the purposes of automated biometric verification or identification, as the collection, use and disclosure of 'sensitive information' is subject to more stringent protections; and
• consider the Privacy Act's requirements for disclosure of Australians' personal information overseas (e.g. for global data consolidation and analytics).

Companies should also stay up to date with developments in Australia's privacy landscape as the Privacy Act is undergoing significant reform, with draft amending legislation expected in August 2024. The reform may expand the framework to create new requirements for the collection and use of personal information.

Further, companies should consider how the Spam Act 2003 (Cth) and recent enforcement action impact direct marketing of vehicles through commercial electronic messages.

4. Telecommunications

Widespread adoption of connected and automated vehicles on public roads may require significant network upgrades, potentially utilising 'dedicated short-range communication' networks for vehicle-to-vehicle and vehicle-to-infrastructure communication. However, existing telecommunications regulations may not keep pace with technological advancements in vehicles, leading to potential ambiguities and gaps in coverage.

Some other key considerations include:

• whether business activities involve providing regulated telecommunications services in Australia, and if so, whether obligations under relevant telecommunications legislations may apply, including licensing requirements for 'carrier' or 'carriage service provider'; and
• privacy obligations on licensed carriers and carriage service providers.

5. Consumer protection

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

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

Moreover, companies providing vehicles or related goods to consumers should review their procedures for providing remedies when goods are faulty, not fit for purpose, or otherwise not match advertised descriptions or demonstrations, including refunds, repairs or replacements as well as product recalls.

Further, companies using standard form contracts with consumers or small businesses should review 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

Additionally, companies investing in Australia's automotive sector should consider a range of other key factors in their business plans, including:

• compliance with local employment laws;
• industrial relations;
• health and safety regulations;
• applicability of Australian franchising laws to the set-up and operations of dealerships in Australia;
• working visa requirements when engaging Australian-based employees and contractors; and
• protecting and commercialising intellectual property assets.

Key takeaways

Australia's thriving automotive sector offers vast opportunities, but timely and thorough business planning is essential to capitalise on them. Some key next 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, strategies and risks, considering collaborations, objectives, target customer base, and key factors such as tax, employment, insurance, funding, and cash flow, as well as approval and registration requirements, procedures and timelines.
• Integrating privacy considerations into product and service design, accounting for evolving vehicle technologies, cross-border data sharing and individual rights. Solutions should be forward-looking to anticipate and adapt to changing legislation and regulatory requirements and regularly reviewed.
• Reviewing the company's documents (including standard form contracts, terms, policies, and notices) to ensure they comply 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 import, export control, sanctions and other regulatory issues, which are often fact-dependent and require careful assessment to identify practical risks and regulatory priorities.
• Considering parallel regulatory developments in Australia, including in relation to artificial intelligence and autonomous technology.
• Drafting and negotiating contracts with local partners carefully to avoid disputes, including clear risk allocation, insurance requirements and effective dispute resolution mechanisms.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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