For what it's worth, generally in the US you can still buy a limited time subscription to the manufacturer's own diagnostic software for a reasonable price, for example BMW ISTA is $32/day, VW ODIS is $130/week, and Ford FDRS is $50 / 2 days. This is enough to complete most module replacement or upgrade tasks for a hobbyist, and still cheaper than dealership labor costs.

There's also a standard for the dongles (which specifies a DLL export interface from a driver, amusingly) called J2534 so you don't need a separate hardware interface for each make, although to your point, the way the laws around J2534 were written was too lax and some manufacturers have realized that there is a loophole where only certain diagnostic tasks like module reflashing need to be possible over J2534.

Also worth noting that reverse engineered software has generally not been majorly threatened by manufacturers in the automotive space; Forscan for Ford, VCDS and OBD11 for VW, and so on are all quite popular.

Unfortunately "security" restrictions especially in the EU and the uprise of ADAS systems has made things a lot harder; most makes now have some online challenge/response cryptography (ie VW SFD) for diagnostics where previously they had offline login, and most ADAS and camera systems require extremely expensive calibration jigs (this is a valid technical problem, but with no incentive to reduce cost or make these systems accessible, they end up being comically expensive).

Anyway the situation in automotive is way better than the situation in equipment and ag, so I don't think it's entirely fair to say that regulation was a complete failure.