Not really an EU issue is it, or at least not in sense we'd avoid post Brexit. Would be equally likely to occur between France and Switzerland as sovereign nations. Indeed, outwith EU international movement of hire cars would likely be a complete no no.

A colleague of my Father's somehow got to Manchester with a French hire car c. 1975 after a driving wrong side of road accident near Limoges. The British end of Hertz was utterly baffled.

The EU regulation is actually quite sensible: it's to prevent tax evasion by moving cars across borders.

It's the way the car hire companies have interpreted it that is the problem. Also, Switzerland isn't an EU member.

From memory I was investigating a trip to New Zealand and wanted to hire a car on Norh Island and drop it off on South Island, I was told no inter island travel is allowed, and I would have to return the car on the first Island then walk with luggage to the ferry and pick up a different car on the other island.