Federal Infrastructure Bill and Other Recent Electric and Autonomous Vehicle Developments

This year, we have seen many developments related to increased testing and deployment of autonomous vehicles (AVs) and electric vehicles (EVs) across a variety of industries.  As transportation moves towards greater electric and autonomous deployments, we will continue to see AV and EV policy and regulatory initiatives.  Globally, AVs and EVs offer near- and long-term solutions for achieving goals such as “Net Zero by 2030” goals.  In addition to national programs, over 25% of the Global Fortune 500 have committed to these goals.  And recently at the World Climate Conference in Glasgow, 30 nations and 11 companies signed on to work towards zero-emissions for all sales of new cars and vans globally by 2040, and by no later than 2035 in leading markets.

Increased EV and AV deployment will require infrastructure investments including installation of advanced charging networks and potential telecommunications infrastructure.  Although the EU has been significantly ahead on such endeavors in the EV space, the U.S. Infrastructure Bill signed into law in November 2021 offers myriad provisions designed to accelerate deployment of EVs on roadways, at ports and key intermodals.  While some believe that the Infrastructure Bill could have done more specifically for AVs, the Infrastructure Bill does include some AV provisions, and federal agencies and many states have been active in adopting and updating EV and AV regulations and initiatives (as more fully discussed below).

EV and AV companies, as well as strategic and financial institutions with interests in the EV and AV sectors, will be well-served to take note of recent developments and prepare for continued technological changes and legal developments as new programs of funding, grants, credits and incentives are implemented.

Below, we offer an outline of several developments to be considered in business strategies for navigating the evolving EV and AV landscapes:

• Federal Developments
  • Federal Infrastructure Bill: A landmark “once in a generation” $1.2 trillion infrastructure bill was passed and will be signed into law in November 2021, including major incentives for transportation and telecommunications.  The bill contains reported billions for EV-related initiatives including:
    • $7.5 billion for purchase of electric school and public buses,
    • $6 billion for battery manufacturing grants,
    • $7.5 billion to build a national network of alternative-fuel charging stations, and
    • $65 billion to update the nation’s electric grid. 
    • A potential $12,500 tax credit for consumers who purchase EVs built by unionized automakers remains pending in the Build Back Better bill.

The bill also includes $65 billion to improve broadband services; billions for ports, airports, and intermodal advancement; and hundreds of millions directed at AVs through the Strengthening Mobility and Revolutionizing Technology (“SMART”) grant program.  Also, considering that many AVs also are EVs, investments in EVs are expected to benefit many AV companies as well.  

• Other Biden Administration Priorities: The Biden Administration has made environmental and equity initiatives central to federal priorities. Recent developments include:  
  • Biden signed EO Nos. 14008 (“Tackling the Climate Crisis at Home and Abroad”) and 14037 (“Strengthening American Leadership in Clean Cars and Trucks”) that among other things:  
    • (i) order the EPA to increase fuel efficiency standards 
    • (ii) order the US Department of Transportation to increase fuel economy standards, 
    • (iii) set a goal of 50% of new car sales to be zero emission vehicles by 2030, and 
    • (iv) establish the Justice40 initiative to deliver 40 percent of overall benefits to disadvantaged communities.   
  • Biden signed EO No. 13985 (“Advancing Racial Equity and Support for Underserved Communities Through the Federal Government”): This EO focuses on pursuing equity in federal policies, including for transportation. 

• Federal Agency Actions: Federal agencies, including DOT and the Department of Commerce, have been busy both implementing Biden’s Executive Orders and on separate initiatives to encourage automotive technology.  In recent presentations, DOT has highlighted interesting opportunities and sources of funding, including the ability to use right of ways to provide EV and AV infrastructure. 

• State and Local Initiatives: Many state and local actors also have been active in investing in EV and AV transportation initiatives.  
  • States have continued to adopt measures related to AVs:  Many states do not explicitly require permits to test or deploy AVs.  Some recent regulations have expressly allowed deployment of AVs where they meet federal safety standards.  Some states have developed rules tailored to specific AV types, such as trucks, passenger cars, and occupant-less delivery vehicles.  And some states have adopted rules for AV platooning in recognition of the role that automation may play in trucking and supply chain logistics.
  • Some examples of recent initiatives from California:
    • Governor Newsom recently signed a $3.9 billion EV mobility bill to subsidize EVs for low-income consumers and finance zero-emission school and public transit buses. Governor Newsom also issued an executive order requiring in-state sales of all new vehicles to be zero-emission by 2035. 
    • The City of Sacramento (among others) has partnered with an EV start up in a public-private partnership to build high speed charging hubs in the city’s light rail station parking lot. PPP opportunities are growing at an accelerating rate as local governments are looking to invest tax dollars into EV projects for the public. 
    • The California DMV issued GM’s Cruise and Alphabet’s Waymo some of the first commercial licenses last month allowing the companies to charge public customers fees for autonomous ride-hailing services.
  • Working with states:  States offer opportunities for public-private partnerships.  These opportunities raise some legal concerns to keep in mind including navigating sovereign immunity and protecting confidential or trade secrets information from public records requests.

• Intellectual Property: IP litigation and negotiations have increased in the automotive space in recent years, including based on: 
  • New Technologies: As automobiles and infrastructure become more complex, they become targets for licensing and litigation, including patents and other IP related to connectivity, geolocation, artificial intelligence and other technology areas. 
  • Developing Standards: Standards have long been an active area for disputes and litigation in the patent and competition spaces.  As vehicles become more connected with Vehicle-2-Vehicle, and Vehicle-2 -Infrastructure capabilities, we expect increased IP disputes, especially in the patent space.  There are other standards that are expected to be subject to IP disputes, including standards related to electric charging.  Some IP holders and licensors have particularly targeted OEMs versus others in the supply chain.  There also have been increasing challenges under US, EU, and other competition laws to certain standards licensing practices.
  • Trade Secrets: Movement of talent in fast-paced industries often leads to trade secrets disputes.  Some of the earliest litigation in the EV and AV spaces has involved trade secrets claims, and we expect to see continued assertions in this space.  
  • Acquisitions and Investments: IP and other issues regularly arise in acquisitions and investments in EVs and AVs, including vetting IP assignments, assessing IP risks and opportunities, as well as scrutinizing regulatory representations and compliance.

• Privacy and Data Breach Liability: 
  • AVs and EVs and related support infrastructure—like other technologies—are potentially vulnerable to security breaches, whether from third parties seeking, among other things, billing information stored in an EV charging stations, driver/passenger travel data, or images of other drivers or pedestrians, as well as from malicious attacks on fleets or infrastructure.  Liability allocation and responsibility for precautionary measures will be key terms in deals, and information collection and retention will be key issues for each company participating in the industry.  
  • The regulatory environment for data security and privacy continues to evolve rapidly, and there are some proposed data security and privacy rules and regulations specific to connected vehicles, including a few limited ones in place, with more likely to follow.   

• Product Liability Risks: The legal landscape for EVs and AVs continues to evolve.  Some examples of potential product liability risks include: 
  • Tort Risks: AV makers (and those that supply AV components) can take proactive steps to avoid claims of negligence and strict liability due to injuries involving AVs.  
  • Recalls: EV and AV recalls often involve software issues.  For example, Porsche AG issued a recall of its EV due to faulty software caused a sudden and total loss of power after the National Highway Traffic Safety Administration received several complaints.  As another example, Tesla has been encouraged to issue recalls for software updates.
  • Indemnification: Considering potential risks, indemnification terms are worth scrutiny in any supply agreement, partnership, acquisition, or investments.

• Regulatory Standards
  • Automated Vehicles:  Automated vehicle regulations continue to develop at the state and federal levels.  See our regulatory roadmap summarizing many of these developments.  In addition, AV technical standards continue to develop in the United States and internationally.
  • Charging stations and EV battery standards:  There are many developing standards related to charging stations and EV batteries.  The Biden Administration’s infrastructure bill also directs the U.S. Secretary of Transportation to develop standards for installation, operation and maintenance of EV charging networks within 180 days of enactment.  
  • Emission Efficiency Standards: Regulatory authorities and nonprofits seek to enforce fuel and emission efficiency standards, moving beyond goals and pledges. For example, the nonprofit Greenpeace sued Volkswagen, Daimler, and BMW last month to phase out internal combustion engines by 2030.
  • Telecommunications Standards:  Developing standards in “Vehicle to Vehicle” and “Vehicle to X” standards will likewise present opportunities to develop valuable IP, and also will raise certain competition and IP risks.

• Supply Chain Concerns:
  • Shortages: Recent events around the world from the COVID-19 pandemic to the US-China trade wars have emphasized the importance and vulnerabilities of global supply chains.  Eventualities from global chip shortages to shipping bottlenecks must be considered in investments and deal terms. 
  • Conflict Minerals: Electric vehicles depend on minerals like cobalt necessary to make lithium ion batteries. There also are human rights concerns regarding raw materials sourced from certain areas of the world. To mitigate such risks, some companies self-audit and/or look towards investments that would not rely on conflict minerals such as cobalt.  
  • Other Steps to Mitigate Supply Disruptions: Other prudent steps include vetting force majeure provisions, closely scrutinizing allocation of risk, and considering the availability of dynamic pricing or cost allocation to address risks. 

As the EV and AV industries continue to evolve, we are available to advise on the risks and opportunities for these exciting technologies.

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Melody Drummond Hansen, an O’Melveny partner licensed to practice law in California, the District of Columbia, and Illinois, Eric Rothenberg, an O’Melveny counsel licensed to practice law in New York, John Rousakis, an O’Melveny counsel licensed to practice law in New York, Jason Orr, an O’Melveny counsel licensed to practice law in California and Colorado, and Deepa Kollipara, an O’Melveny associate licensed to practice law in California, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

© 2021 O’Melveny & Myers LLP. All Rights Reserved. Portions of this communication may contain attorney advertising. Prior results do not guarantee a similar outcome. Please direct all inquiries regarding New York’s Rules of Professional Conduct to O’Melveny & Myers LLP, Times Square Tower, 7 Times Square, New York, NY, 10036, T: +1 212 326 2000.