Electric Vehicle Risks: New Focus of Regulators

The use of electric vehicles (EVs) and micromobility devices (EMDs), e.g., electric scooters, electric bikes, and hoverboards, is on the rise and the accompanying potential risks of EVs and EMDs have become a new area of focus for regulators. According to the U.S. Energy Information Administration, the number of EVs on U.S. roads reached 2.13 million, a steep increase from less than 100,000 EVs on the roads in 2012. The use of EVs has been encouraged worldwide in an effort to reduce emissions generated by internal combustion engine vehicles. Governments, including the U.S. federal government, have incentivized the switch to EVs through a variety of means, including purchase incentives, tax credits, and charging station infrastructure grants. For example, on March 20, the Biden Administration announced a sweeping regulatory package expected to substantially increase the manufacture and use of EVs in the U.S. EMD use is also on the rise in larger cities, including for commuting and food delivery.

This rise in the use of EVs and EMDs has cast a spotlight on two areas of potential risk: (1) physical risks, in particular potential fire hazards posed by lithium-ion batteries used in EVs and EMDs; and (2) cybersecurity and national security risks posed by the software solutions backing EVs. Below is a summary of the attention that regulators are paying to these risks and expected future compliance obligations.

Potential Physical Risks

The physical hazards potentially posed by EVs and EMDs can be real, especially when consumers fail to follow manufacturer’s instructions for safe and proper use. By 2023, fire departments in New York City and San Francisco had responded to at least 669 incidents of fires allegedly related to lithium-ion batteries, the battery option of choice for EVs and EMDs. Several fatalities have also allegedly been caused by lithium-ion battery fires. Stakeholders have commented that incident rates involving EMDs continue to rise for a number of reasons, including the recent emergence of EMD products, the wide range of consumer uses for these products, inconsistent product quality, misuse by consumers, and a lack of uniform regulation.

The U.S. Consumer Product Safety Commission (CPSC) has issued a safety alert specific to EMDs in an effort to encourage the safe use of EMDs. The CPSC encourages consumers to only use EMDs that have been certified in compliance with voluntary safety standards, only charge EMDs while present during the day, only use replacement battery packs approved by the manufacturer/retailer, and follow the manufacturer’s instructions for proper charging. These easy steps can reduce the potential fire risk associated with EMDs, according to the CPSC. For example, the CPSC urged consumers to stop using a particular brand of EMD following a fatal apartment fire that fire officials found was caused by the lithium-ion battery used in that scooter, which had not been certified by an accredited laboratory to the applicable voluntary safety standard. Notably, that scooter was also being charged by a charger with the incorrect voltage sold by the company.

The potential risk of fire posed by some lithium-ion batteries has led to growing interest among stakeholders, including industry members, voluntary standards bodies, fire departments, and consumer advocates, in the establishment of uniform, mandatory safety standards that would govern EVs and EMDs. For example, in late 2023, CPSC brought together a group of experts to discuss the potential fire safety risks posed by lithium-ion batteries in e-bikes. The group unanimously recommended that CPSC set strong mandatory safety standards to govern lithium-ion batteries in e-bikes (safety standards for EMD batteries are currently voluntary). A U.S. House subcommittee also held a hearing to examine emerging EV fire concerns. Statements during the hearing included calls for the imposition of safety standards in the design of lithium-ion batteries, widespread education campaigns on the harms that can be caused by improper use of EVs, and the enforcement of laws that should require periodic vehicle safety checks to ensure that EVs maintain reasonable safety precautions. One expert also called for more research to reduce the potential fire hazards associated with lithium-ion battery EVs and EMDs and to develop capabilities to identify and discharge the energized modules in batteries that can often cause continuing fires).

The industry calls for regulation and the attention given to the safety issues by various U.S. regulators suggest that manufacturers of EVs, EMDs, and related batteries can expect a push for regulation sooner rather than later. Laws, regulations, local ordinances, and guidance have been proposed and enacted at various levels of government, which is accelerating the need for more uniform or harmonized standards. For example, New York City has passed five bills in the last year designed to address potential lithium battery risks, including prohibiting the sale, lease, or rental of e-bikes and e-scooters that fail to meet UL 2849, UL 2272, and UL 2271 standards.

This call for uniform regulation may partly be addressed by the CPSC’s plan to propose rules for lithium-ion batteries in EMDs and mechanical safety standards and requirements for EMDs. To prepare for this eventuality, potentially affected manufacturers should take steps to ensure that their products meet at least the currently accepted voluntary safety standards, for example, those set by Underwriters Laboratories. Manufacturers should also consider taking immediate steps to educate consumers on safe use of their EMDs.

The Cyber and National Security Risks

During the U.S. House subcommittee hearing mentioned above, Dr. Judy Jeevarajan, Vice President and Executive Director of UL Research Institutes’ Electrochemical Safety Research Institute, raised a cybersecurity concern associated with EVs and their batteries: EVs and their battery software are now updated remotely—to promote efficiency, safety, and consumer satisfaction—but remote updates can be intercepted, allowing bad actors to hack vehicle systems and cause serious negative outcomes including fires and accidents.

Similarly, the increasing reliance on artificial intelligence (AI) in EVs heightens cybersecurity risk by creating the potential for hackers to gain unauthorized control of vehicle functions, compromise user privacy, and threaten passenger (and pedestrian) safety. A new report from McKinsey & Company described applied-AI applications or tech enabled by applied AI as “the leader by far” among the transformative technologies prioritized by autonomous, connected, electrified, or shared mobility companies. McKinsey predicts that this number will only rise in response to growing consumer demand. With this growth, the cyber risks only increase.

President Biden has specifically addressed the national security risks posed by the development and sale of internet-connected EVs. These vehicles are connected to and share data with mobile devices, navigation systems, and, crucially, the EV manufacturers. President Biden has expressed concern that “[c]onnected vehicles from China could collect sensitive data about our citizens and our infrastructure and send this data back to the People’s Republic of China. These vehicles could be remotely accessed or disabled.” Accordingly, the president has directed the U.S. Commerce Department to investigate the potential security risks posed by these internet-connected vehicles.

Given the growing concern about the cyber and national security risks posed by EVs, manufacturers can expect regulators to begin proposing new requirements for everything from fire safety to cybersecurity and privacy. It remains to be seen what regulations will ultimately be imposed and when they will take effect.

Relevant to EVs, the Department of Justice (DOJ) also recently announced a new focus on the use of AI, as we reported in an earlier client alert. Deputy Attorney General Lisa Monaco explained that DOJ is working with other federal agencies to create guidance and to ensure that the use of AI does not harm the safety or rights of U.S. residents. Monaco noted that AI controls will be a top priority of the Disruptive Technology Strike Force, a joint effort of DOJ and the U.S. Department of Commerce launched in February 2023. The Disruptive Technology Strike Force will be looking to export control laws to ensure that international adversaries are not able to misappropriate cutting-edge American technology. Monaco also highlighted the U.S. government’s work with foreign governments, including participation in the G7’s Hiroshima AI Process and the resulting Comprehensive Policy Framework, a multinational attempt to “internationalize” a code of conduct for the design of safe and trustworthy advanced AI systems.

As governments move toward AI regulation and related enforcement, EV manufacturers can prepare by developing robust protocols for physical and cyber safety. Manufacturers should be taking steps to consistently test EV safety, stress-test their systems’ cybersecurity, and upgrade functionality and security where needed.

EMDs have become quintessential to daily life in cities and are used most often in the food delivery business and for everyday city commuting. EVs are also rising in popularity, with governments aggressively promoting the electrification of the global transportation network in an effort to reduce greenhouse gasses. Those same governments are now seeking to regulate and police EV and EMD safety, and manufacturers that anticipate these changes and adapt effectively will secure an important competitive advantage as the EV and EMD markets matures.