Legal safeguards for customers facing defects in EVs

Bharat Anand, Partner, Achint Kaur, Counsel and Mukul Aggarwal, Principal Associate at Khaitan & Co discuss the legal safeguards for defective electric vehicles.

By Bharat Anand, Achint Kaur, Khaitan & Co calendar 09 Jan 2024 Views icon3527 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
Representative image of EVs

With a 45.5 percent compounded annual growth rate forecasted in India's Electric Vehicles (EV) sector between 2022-2030, India expects annual sales of 1.6 crore EVs by 2030. One of the key aspects in preparing for the EV surge necessitates addressing a host of risks including safety issues and battery costs. 

Regulatory enforcements in India

If any harm is caused by a defective EV manufactured, sold or by a deficiency in services, then the manufacturer or seller has the product liability and responsibility respectively to compensate the consumer for any harm caused or incovenience faced.

Further, mass product recalls may be enforced by the Ministry of Road Transport and Highways (MoRTH) against manufacturers if the defect impairs the environment, driver, occupants, road users or consumers; or the defect is reported to the MoRTH; or the product or component is faulty. To enhance the safety of EVs, the Central Government has prescribed technical requirements in the form of AS-156 (Specific Requirements for L Category Electric Power Train Vehicle) and AIS-038 (Rev 2) (Specific Requirements for M, N Category Electric Power Train Vehicles).

These norms were introduced in two phases and specify additional tests such as IPX7 rating, mandating water immersion and thermal propagation tests, safeguarding against vehicular fires, requiring EVs to maintain smart battery management systems, and including charge voltage cut-off to pre-empt overcharging and short-circuiting. With the intent of safeguarding human safety, the Ministry of Heavy Industries has made these norms mandatory from 1 October 2023, for claiming incentives under the production-linked incentives and Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) II schemes.

Laws on product liability for the EV space are evolving globally.  Several courts are now performing root cause analyses of the harm to ascertain liability to resolve product liability cases on fully autonomous and semi-autonomous cars, and vehicles involving artificial intelligence, and Internet of Things (IoT).

For example, in high-tech automobiles showing liability for a product defect requires proving the existence of a reasonable alternative design whose adoption could have reduced, or prevented, the harm, which becomes a highly technical question. In hybrid semi-autonomous vehicles, reliance is placed on the traditional negligence theory to prove liability, for instance, whether inattentiveness of the ‘driver’ led to the defect.

In April 2023, the California court in the case of Justine Hsu versus Tesla Inc, absolved the latter of liability on the pretext that the driver did not follow safety standards while using the autopilot advanced driver-assistance technology.

Potential measures to ramp up EV safety

EV companies in India may consider some key measures to mitigate an adverse impact on goodwill or revenue. They can develop a product liability strategy and a defence mechanism, to improve the organisation's ability to mitigate the risk of product recall.

This may include maintaining real-time logs of the equipment’s performance indicators using new-age tech products such as predictive battery maintenance technology to establish whether the damage has emanated from its products or services, securing the wreckage, and storing it in a safe location for a root cause analysis of the accident.

Undertaking a compliance assessment that integrates technology with policies and procedures can help in timely detection of the product’s defects, to proactively nip any issues in the bud. Conducting periodic product risk management can further avoid design or manufacturing defects.

EV companies can also add safeguards in supply and distribution contracts that provide user instructions and warnings. This lays out customer responsibility for safe handling of the products. They can also clarify that except for limited product warranties, the product is being provided on an ‘as is’ or ‘as available’ basis, with exclusions of any implied warranties to the maximum extent permitted under applicable law.

This includes merchantability, fitness for a particular purpose, results obtained, application, indirect, consequential, incidental, special or remote damages, combination, misuse or modification claims, limitations for contributory negligence, defined use in terms of scope, period, recourse (sole and exclusive remedy), amount, conformance with specifications, conducting one’s own independent due diligence and end-use product evaluation, to determine the suitability, safety, meeting the requirements and their desired end-use performance is as intended, and assumption of risk.

This interview was first published in Autocar Professional's December 15, 2023 issue.

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