Automotive Industry litigation risks: trends, challenges and prevention strategies

The litigation landscape in the automotive industry has rapidly developed in recent years, with the acceleration of AI, cyber-attacks and global volatility exposing stakeholders to increased litigation risk.

This is reflected in a recent automotive industry report from US law firm Dykema Gossett (the “Report”), which provides insight into the ongoing and emerging litigation risks faced by the sector. Based on a survey of suppliers, manufacturers and other stakeholders, the Report sets out current trends and perceived legal risks from an industry perspective. Although centred on the US market, many of the themes identified have clear parallels in the UK.

IP and AI technology

Vehicle technology is becoming exponentially more complex, particularly as manufacturers embed AI-driven software, autonomy features and data‑intensive systems at the core of modern vehicles. The rapid adoption of electric and hybrid vehicles has acted as a significant catalyst for technological advancement, with over three million battery electric or plug-in hybrid electric vehicles now on UK roads in 2026 (a sixfold increase from 2020).

Where mechanical designs were once the primary focus of legal protection, value is now increasingly created through complex coding, battery systems and connected platforms, which include cloud servers, mobile applications and charging networks (many of which are licensed rather than owned outright). As a result, intellectual property is a key part of a vehicle’s value, with superior technology delivering improved performance, competitive advantage and enhanced commercial value. The shift from outright ownership to complex licensing models across connected vehicle platforms also creates fertile ground for disputes over scope of use, sublicensing rights and territorial restrictions, particularly where multiple technology providers contribute to a single integrated system.

IP infringement is therefore a significant litigation risk. More than half of respondents in the Report identified IP theft as a key concern, reflecting how easily valuable code, complex designs and confidential know‑how can be exposed across fast‑moving and highly integrated supply chains.

AI introduces a further layer of complexity and risk. AI systems used in vehicles rely on specialist expertise, large datasets and models that continue to evolve over time. This raises difficult questions around ownership of AI-generated outputs, lawful use of training data, and responsibility where AI behaviour causes loss. There is also a growing risk of inadvertent IP infringement where AI models are trained on third party data or code without appropriate licences, which could expose automotive businesses to claims that their AI systems reproduce or derive from protected works ingested during the training process.

As AI capability becomes a key differentiator in EV performance and safety, we consider that weaknesses in governance, contracting and data controls will increase the likelihood of disputes arising. In particular, standard form supply and manufacturing agreements that pre-date the widespread integration of AI may fail to adequately address the allocation of rights in AI-generated improvements, liability for decisions made by AI systems, or obligations around model transparency and explainability. Companies should be reviewing template agreements to assess whether AI provisions should be included.

With IP theft and AI disputes on the rise, it is important that those in the automotive industry register their intellectual property rights, take steps to enforce them, and put in place robust contracts with AI provisions that protect their position as far as possible. Key contractual protections should include clear IP assignment and licensing provisions that specifically address AI-generated and AI-assisted outputs, audit rights over training data provenance, appropriate warranties and indemnities covering third party IP infringement by AI systems, and defined escalation mechanisms where AI outputs produce unexpected or harmful results.

If you would like to read our insights and updates on the latest AI developments that impact law, business and society, and to find out how Brodies is integrating AI into its own business journey, check out our AI hub.

Commercial supply chains

The automotive supply chain remains highly exposed to disruption, particularly in a ‘just‑in‑time’ production environment reliant on the timely delivery of a large number of individual components. This leaves the industry vulnerable to operational, cyber, financial and geopolitical risk. In the Report, 79% of respondents cited tariff‑driven cost pressures as an area of concern, alongside geopolitical tensions (52%) and risks around semiconductor and critical minerals supply (30%).

Sharp fluctuations in material availability and pricing have exposed the limitations of contracts which do not accommodate sudden, large‑scale change. This has resulted in disputes over cost allocation within tightly integrated supply chains. Although a move towards dual sourcing of materials and components is intended to mitigate these risks, they often introduce additional contractual and pricing complexity.

The increasing reliance on proprietary AI and software components within the supply chain adds a further dimension of risk. Where a key supplier provides AI models or algorithms integral to vehicle function, the failure or insolvency of that supplier may leave manufacturers unable to maintain, update or replace critical systems, particularly where source code escrow arrangements or technology transfer provisions have not been negotiated at the outset.

These pressures frequently crystallise in disputes arising from late delivery, reduced volumes or complete supply failure, with immediate knock‑on effects where production lines are forced to stop. As such, it is imperative that such contracts anticipate, and deal with, these issues (i.e. through the inclusion of liability provisions) to minimise the potential for future disputes.

Cyber-attacks

Disruption affecting Jaguar Land Rover, where a cyber-related incident impacted operational continuity in 2025, highlights the growing exposure of automotive businesses to cyber incidents, including ransomware and extortion attacks, which around 50% of respondents identified in the Report as a key risk. As discussed above, automotive supply chains are complex, global and heavily reliant on ‘just‑in‑time’ delivery, meaning attacks on part of the chain can have immediate and widespread effects.

Cyber threats increasingly involve sophisticated social‑engineering techniques, often enhanced by AI, enabling attackers to target employees, logistics providers and IT contractors. This approach has been seen across UK businesses, including high‑profile retail incidents such as the M&S cyber‑attackin 2025, and underscores the importance of actively managing cyber risk across the supply chain.

In late 2025, the UK Government published the long-awaited Cyber Security and Resilience (Network and Information Systems) Bill. If passed, this will update cyber security laws in the UK by expanding cyber resilience obligations to new sectors and entities, introducing new incident reporting obligations, and granting new powers to the Government and regulators. However, as the Bill does not propose bringing manufacturing within its scope, it may have limited impact on cyber-attacks in the automotive industry. You can find out some more information on this Bill in our blog, and find details of our Cyber experts here.

Data leaks

The Report also highlights compliance with data protection law as a significant litigation risk. Under UK law, individuals may claim compensation where a data breach causes damage or distress resulting from non‑compliance by businesses, such as unlawful processing of data or inadequate security measures. Regulatory exposure compounds this risk, with the Information Commissioner’s Office able to impose substantial fines for serious breaches. Awards are highly fact‑specific and remain a developing area. However, recent cases, including group proceedings (class actions) allowed to proceed in the Court of Session in Scotland, following an Arnold Clark data breach, demonstrate the growing scale of claims arising from cyber incidents in the automotive industry.

Group proceedings (class actions)

Group proceedings are possible against automotive businesses operating in Scotland, particularly where a single issue affects a wide class of customers, employees or commercial partners. Data breaches, systemic product defects, software failures and misleading disclosures are all capable of giving rise to claims sharing common factual or legal issues.

Scotland has a dedicated framework for group proceedings in the Court of Session, which has materially increased the attractiveness of collective litigation. Although Scottish group proceedings operate on an opt‑in basis, this sits alongside the UK’s opt‑out regime for competition damages claims, meaning automotive businesses may face collective litigation risk across multiple forums, depending on the nature of the issue.

In the automotive industry where products, data and contractual arrangements are deployed at scale, early risk identification, robust compliance and coordinated incident response are critical to limiting exposure before group claims crystallise.

You can find more details on the Scottish group proceedings rules and contact details for our expert team here.

Conclusion

The Report underlines how litigation risk is evolving for automotive businesses, as technological innovation intersects with global supply chains and heightened cyber exposure. Against that backdrop, disputes are likely to arise across a broad range of issues, from IP and AI ownership questions, to supply disruption and pricing pressure, through to cyber security incidents, data protection claims, and the growing prospect of collective litigation.

Proactive risk management, through robust contracting, clear governance of data and AI, effective cyber resilience and early incident response planning, will be key to mitigating exposure and protecting value as the industry continues to transform. In particular, automotive businesses should prioritise a thorough review of existing technology and supply contracts to ensure that AI-specific provisions, including the clear allocation of IP rights in AI outputs, appropriate training data warranties, and adequate liability frameworks for AI-driven decisions, are embedded as standard.

If you would like to speak to one of our experts about litigation risks in the automotive industry, please get in touch with a member of the IP, Technology & Data team or your usual contact at Brodies.