Insights

Consumer Protection Laws and Electric Vehicle Purchases

Mitali Mehta

Protection of consumers in the electric vehicle revolution
With the onset of the electric vehicle revolution, the alternative of zero-emission vehicles having significantly less running and maintenance costs is becoming more rewarding. The overall efficiency of electric vehicles together with reduced environmental impact and tax and financial benefits has led to the increase in sales of electric vehicles in India. In light of this, all stakeholders in the electric vehicle industry must familiarise themselves with the applicable consumer law in India from the perspective of affording protection to the interests of the end consumer.

Applicable consumer law
Like any other consumer product, the rights of consumers[1] (buying electric vehicles) are also governed by the Consumer Protection Act, 2019 and the rules and regulations made thereunder (“CPA”) in India.

Recourse under the CPA to consumers is available against product manufacturers including original equipment manufacturers, dealers, product sellers, product service providers, traders, advertising agencies, endorsers and e-commerce entities/sellers, thereby making it applicable to manufacturers (including original equipment manufacturers) and purchasers of electric vehicles.

Consumers, therefore, inter alia have the right under the CPA to -

(i) seek redressal and relief against unfair/restrictive trade practices/ defective goods/ deficient services;
(ii) seek compensation (including refunds, replacement, or reimbursement, etc.);
(iii) enforce a product liability[2] claim for any ‘harm’[3] caused by ‘defective’[4] products/ ‘deficient’[5] services;
(iv) file class action lawsuits; and
(v) seek protection from unfair contract terms.

Non-compliance consequences under consumer law

The CPA prescribes punishment for non-compliances inter alia such as failure to comply with directions issued (relating to recall of goods, false/misleading advertisements, etc.), and handling of any product containing an adulterant[6]. The punishment for such non-compliance may be imprisonment for a term ranging from 6 (six) months to 7 (seven) years and/or monetary fines up to INR 50,00,000.

Contemporary consumer issues

Typical issues faced by purchasers of electric vehicles in India inter alia relate to defects in manufactured products, misrepresentations made to consumers and non-compliance with pre-conditions prescribed under government initiatives, a couple of instances of which are provided hereinbelow.

In 2022, there were reports of several electric two-wheeler vehicles catching fire due to use of low-grade materials in order to cut costs. In furtherance of such events, several technical requirements were prescribed by Indian regulators which were made mandatory by the Ministry of Heavy Industries for claiming incentives under Production Linked Incentive (“PLI”) and Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (Phase-II) (“FAME II”) schemes.

In Kandi Shailaza and Anr. v. Benling India Energy and Technology Private Limited and Anr. (2023)[7], the District Consumer Disputes Redressal Commission reiterated that there is a statutory liability on product manufacturers and product sellers under the CPA for the sale of defective products, where such liability is strict in nature. Thus, a failure to comply with such technical standards would render manufacturers and original equipment manufacturers liable under the CPA especially if they utilise PLI and FAME II incentives.

In 2023, the Ministry of Heavy Industries withheld subsidy claims made by companies under FAME II in relation to the approved electric vehicle models till such companies ensure compliance with the eligibility criteria established thereunder. Companies contravened the ‘ex-factory price’ threshold, by

(i) selling chargers and their intrinsic software required for operations separately to fall within the threshold prescribed;
(ii) claiming subsidies for higher battery capacities while limiting the actual usable battery capacity.

Upon issuance of stoppage notices by the authorities and the withholding of the subsidy amounts, such companies were required to issue refunds to their customers who paid additional amounts towards their purchases. Thus, such instances of overcharging may also prompt legal action from consumers under the CPA.

Suggested disclosures at the time of sale

To help consumers make informed decisions and to limit instances of fraud and misrepresentation against consumers, there are certain disclosures that stakeholders may generally provide to consumers as a commitment to ethical business conduct, containing information about:

(i) the battery (its capacity, type, expected lifespan, and charging characteristics) along with its warranty terms and conditions;

(ii) the range on a full charge (with factors that can affect range);

(iii) the availability and compatibility of charging infrastructure;

(iv) maintenance requirements specific to electric vehicles and recommended service intervals and costs;

(v) government incentives, subsidies, or tax credits available;

(vi) the environmental impact, including carbon footprint and potential reductions in greenhouse gas emissions;

(vii) performance characteristics including acceleration, braking, etc.;

(viii) warranty (coverage period, conditions, limitations) for the entire electric vehicle, including its components, where such warranty period is adhered to since failure to conform may invite consumer claims;

(ix) the recycling and disposal procedures for components, especially the battery; and

(x) comprehensive user manuals and educational materials to understand operations and maintenance.

Conclusion

Whilst consumers now appear to be savvy as they buy new automobiles, the EV automobile space is relatively newer and the questions/information sought by consumers from two and three-wheeler makers would also to that extent differ. So while the vehicle makes and dealers should make clean disclosures consumers, on the other hand, should also ask the right questions in line with the above and undertake their diligence to avoid any red flags and grey areas which would later result in inconvenience and financial expenses to the consumer.

[1] ‘Consumer’ under the CPA extends to inter alia any person that buys any goods or hires/avails any services for a consideration, including by way of offline and/or online transactions, where such consideration may be paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment.

[2] Introduced under Chapter VI of the CPA.

[3] As defined under Section 2(22) of the CPA.

[4] As defined under Section 2(10) of the CPA.

[5] As defined under Section 2(11) of the CPA.

[6] As defined under Section 90 of the CPA.

[7] Case number CC/36/2023 before the District Consumer Disputes Redressal Commission, Medak at Sangareddy.