Automotive sector outlook: reflecting on enforcement risk

Looking back on an eventful year for legal developments in the automotive space 12 min read

The automotive sector continues to be an active space for litigation risk and legislative reform. Automakers face not only product liability risks arising from the cars themselves, but also litigation and regulatory risks in relation to their advertising practices, franchising arrangements and the activities of their finance arms.

In this Insight, we explore some of the key issues and developments facing the sector.

Latest ACCC enforcement action on misleading representations

Last year, the ACCC brought two proceedings in the automative sector for allegedly misleading or deceptive advertising.

In April 2025, the regulator instituted proceedings in the Federal Court of Australia against Ateco Automotive (trading as LDV Automotive Australia), alleging that—over a period of around five years—LDV made misleading representations to consumers that LDV-branded vehicles (the T60 and G10 models) were durable, tough and suitable for use in or near a variety of environments and off-road terrains when, in fact, the models had a propensity to rust within five years of manufacture.

LDV's promotional material for the vehicles used captions such as 'rugged and ready', and contained images of the vehicles driving on beaches, through rivers or in other rough, off-road terrain. Advertising also included statements such as:

The T60 is up to any challenge you care to take on—work or play, on-road or off… It turns the toughest tracks into a walk in the park…

Who needs roads when you're driving a T60?

It is alleged that the vehicles' propensity to rust meant they were not, in fact, 'durable and tough', and the fact that this propensity to rust only increased when the vehicles were used in the off-road environments meant the vehicles were not suitable for use in the advertised terrains.

The ACCC also alleges that by advertising a 10-year anti-corrosion warranty, LDV represented that the relevant vehicle models did not have a material risk of developing rust or corrosion in the first 10 years of manufacture—and that those representations were also false or misleading.

Similarly, in June 2025, the ACCC commenced proceedings against Jayco for allegedly making misleading or deceptive representations by advertising certain models of caravans in off-road conditions for which they were not, in fact, designed. The ACCC alleges Jayco's advertising for its Outback, All Terrain and CrossTrak caravans depicted the vehicles in unsealed, undulating and heavily rutted roads, river crossings, sand or beaches or in locations that are known only to be accessible by 4WD-only tracks. Despite this, Jayco's warranty described the caravans as not being designed for use on 4WD-only tracks, terrain with hard impacts, heavy landings or rutted roads or tracks.

Jayco's advertisements also included wording such as: 'built with off-road travel at the forefront' and 'designed specifically for off-road adventures'.

In each of these cases, the ACCC alleges that misleading representations arise through the impression created by not just the words but also the imagery used in the manufacturers' advertising. These cases serve as a reminder to original equipment manufacturers of the risks of using promotional materials that depict their vehicles in environments for which they are not designed and/or well suited—and that the test for misleading conduct focuses on the overall impression conveyed to the audience.

Automotive finance under review: class actions and regulatory intervention intensify  

Class action risk regaining momentum

Class action litigation targeting automotive finance is accelerating, with recent proceedings targeting add-on insurance and commission-based lending practices.

A class action filed in the Supreme Court of Victoria has raised issues with the sale of low-value insurance products by Toyota Finance and its insurer between 2010 and 2021.¹ In particular, it is alleged that some of these products— including payment protection, finance gap, and extended warranty insurance—did not have adequate disclosure and, in some cases, were sold to consumers ineligible to claim.

This proceeding follows a series of earlier class actions concerning flex commissions against ANZ and Macquarie Bank,² Westpac and St George Finance,³ and Macquarie Leasing⁴—all of which have since been settled—and also Toyota Finance.⁵ In the Toyota case, it is alleged that dealers were permitted to inflate interest rates above a base rate, with the margin retained as commission involving potential breaches of the National Consumer Credit Protection Act 2009 (Cth) (NCCP Act), the Corporations Act 2001 (Cth) and the ASIC Act 2001 (Cth).

ASIC’s enforcement priorities shift towards automotive finance

This uptick in litigation coincides with increased regulatory scrutiny. In March 2025, the Australian Securities and Investments Commission (ASIC) announced a sector-wide review of motor vehicle finance, focussing on compliance, loan defaults, hardship practices and dispute resolution processes, in an effort to improve consumer outcomes, particularly for regional and First Nations consumers.

ASIC announced the preliminary findings from its review in November 2025, which revealed excessive loan establishment fees and poor loan affordability rates, and led ASIC to issue compliance letters to participating lenders outlining its recommendations for improvement. The detailed findings from ASIC's review are expected in 2026 and may act as the catalyst for further litigation and regulatory reform.

The review aligns with ASIC's decision to continue its focus on predatory credit practices targeted at financially vulnerable consumers, which remains one of ASIC's key enforcement priorities for 2026, and builds on the momentum from its civil penalty proceedings against:

• Money3 Loans Pty Ltd, in which the Federal Court recently upheld ASIC's claims that Money3 had failed to adequately verify its borrowers' living expenses, but rejected claims related to the suitability of the loans offered by Money3, or the conduct and training of its representatives;⁶ and
• two Sydney car dealerships and one of their former directors for alleged breaches of responsible lending obligations and unlicensed lending practices under the NCCP Act.⁷

Key takeaways

The convergence of automotive finance-related consumer class actions and ASIC’s regulatory enforcement agenda signals a recalibration of risk for automotive financiers. Industry participants—including lenders, brokers and intermediaries—should anticipate increased scrutiny of product suitability, disclosure practices and compliance with consumer protection legislation. The detailed findings from ASIC’s review are expected in 2026 and could trigger further regulatory activity in the sector.

Consumer guarantees reform flagged as 2026 priority

In November 2025, federal, state and territory consumer affairs ministers confirmed that introducing prohibitions and penalties to enhance the effectiveness of the consumer guarantees and the supplier indemnification regime was a consumer policy priority for 2026.

This follows the Federal Government's 2024 public consultation on a proposal to introduce civil prohibitions and penalties for breaches of these provisions under the Australian Consumer Law. The results of this consultation have not yet been released, but are likely to come out this year.

Automotive manufacturers, importers and dealers should continue to monitor developments closely as the introduction of civil penalties and expanded enforcement powers for regulators could materially alter the risk profile for consumer guarantee disputes.

Access to documents of a parent company

Another trend in automative litigation is plaintiffs seeking access to documents and information held by an overseas parent company. There are a variety of procedural mechanisms available to plaintiff firms and class action promoters to achieve this goal.

For example, in the Toyota diesel emissions class action, the plaintiff appears to have used a joinder strategy to facilitate access to technical documents and information in the parent company's possession regarding the background and design of the relevant emissions control devices. The Supreme Court of Victoria granted the plaintiffs' application to join Toyota's Japanese parent company in March 2025.⁸

Another tactic that is often deployed is asking the court to exercise its discretion to permit the applicant to issue a request to a foreign court for access to documents discovered in overseas proceedings. For example, in the Ford DPS6 transmission class action, the applicant was granted leave to seek a copy of discovery of technical documents that had been discovered in related class action proceedings brought in the United States. Justice Perram granted leave on the basis that the documents were relevant to the Australian proceeding; it was unlikely the Australian subsidiary would possess the documents given its position as an importer and not manufacturer of the vehicles; and the trial date in the Australian proceeding was not threatened by the applicant's use of the overseas process.⁹

Key takeaways

• Disclosure risk: multinational automotive companies should anticipate the prospect that they may be ordered to produce documents, or be joined as defendants in proceedings involving their Australian subsidiaries, particularly where the proceedings relate to technical documents that are expected to only be held within the possession of the parent company.
• Practical considerations: this trend reinforces the importance of robust document management protocols and clear lines of communication between subsidiaries and parent companies.

Privilege claims over internal investigative reports and technical documents

Consistent with a general theme we are seeing across class actions and other forms of litigation (see our separate Insights on the privilege claim rulings in the Optus and Medibank class actions here and here), the privilege claims of automakers are being heavily scrutinised and challenged.

In 2025, the Federal Court upheld Mitsubishi's claim of legal professional privilege over documents relating to an internal investigation into fuel consumption.¹⁰ An employee from Mitsubishi's engineering division had created certain documents after receiving an email about the fuel efficiency proceedings that had been commenced against the company. The employee anticipated those proceedings could result in further litigation, including a potential class action, which would require testing material and data from his division. He therefore created the documents to put himself in a position where he could assist with that anticipated litigation if asked to do so by the legal department.

Even though the documents were brought into existence prior to a class action being launched (the class action ultimately being commenced around a year later), Justice Raper found the documents were created for the dominant purpose of use in prospective litigation.

In Mitsubishi, the Court's close scrutiny of evidence contemporaneous to the creation of the technical documents revealed that the documents satisfied the 'dominant purpose' test because:

• the employee only set in train the process of creating the documents after he was notified of extant litigation related to the subject vehicles;
• given recent Australian class actions in the vehicle manufacturing industry, the employee had a well-founded and reasonable apprehension of the possibility of a class action; and
• the employee's contemporaneous actions, such as enquiring with the legal department about class action risk, were consistent with the documents being created for the dominant purpose of litigation.

Key takeaways

This decision reaffirms that privilege can attach to technical and investigative documents prepared in anticipation of litigation, even where litigation is only anticipated and has not yet been commenced, and even if the documents are not immediately communicated to legal advisers.

Courts continue to back distribution model changes

Australian courts continue to reinforce automakers’ freedom to make strategic business decisions. As noted in our previous Insight, this includes the freedom of automakers to restructure their distribution networks without breaching their good faith obligation under franchising law or the law against unconscionable conduct, subject to paying damages where there is a breach of contract.

A first instance decision of the Supreme Court of Victoria has now recognised that same freedom in a different context, confirming that an automaker may lawfully exit the Australian market altogether, even before its dealer agreements expire.

Franchisees challenge GM Holden's early exit

The Supreme Court of Victoria gave judgment last year in a long-running claim by dealers arising from GM Holden's exit from the Australian market in 2020.¹¹ GM Holden ceased supply of Holden vehicles by August 2020, and terminated existing dealership agreements before expiry. The evidence established that the decision to retire the Holden brand and cease distribution in Australia was made by General Motors Company (GMC) in the United States, and without influence from the Australian business.

The lead plaintiff, Beecham Motors, had entered into a five-year agreement to sell and service Holden-branded vehicles, expressed to expire on 31 December 2022. It alleged that GM Holden breached the agreement by failing to 'endeavour to supply dealers with a sufficient quantity of vehicles' to meet sales evaluation guides or reasonably anticipated demand. Beecham also argued that GM Holden should have persuaded its US parent company, GMC, to delay the brand’s retirement. Further, the plaintiffs alleged GM Holden breached its overarching obligation under the Franchising Code to act in good faith. They argued GM Holden failed to ensure the availability of new Holden vehicles and refused to accept purchase orders, thereby undermining the commercial purpose of the dealer agreements.

Court rejects contractual and good faith claims

Justice Nichols rejected both claims. Her Honour found that GM Holden had met its contractual obligations by putting in place appropriate distribution arrangements and that it was not required, as the plaintiff had contended, to make entreaties to GMC.

In rejecting the good faith argument, Justice Nichols clarified that the duty of good faith 'is rooted in the bargain and requires behaviour to support it, not undermine it'. Her Honour held that the obligation entails honesty, fidelity to the bargain and fair dealing—but does not impose a requirement for continuity of supply where none exists in the contract.

Key takeaways

If similar circumstances were to occur in respect of a motor vehicle dealership network today, this would be the type of change for which the franchisor would be required to have a compensation mechanism for early termination in place in the agreement. That said, the decision is still helpful in confirming the following:

• Strategic discretion affirmed: subject to any applicable contractual constraints (and subject to the compensation mechanism for early termination), automakers are not legally obliged to maintain operations or to preserve dealer networks despite the end of the overall business in Australia. This decision underscores the importance of clear drafting and risk allocation in franchise and dealership agreements.
• Good faith has its limits: the obligation to act in good faith supports the operation of the contractual bargain between the parties, including by requiring the parties to act transparently and honestly, but it does not create a freestanding basis to override a franchisor’s right to make commercial decisions about its business model.