It was nothing to do with protecting the motor industry, it was solely about keeping a power assist model as a bicycle so it could avoid motor vehicle bureaucracy. The two basic decisions to achieve that were first made in Japan and then largely copied by the EU, whose rules also applied to us.A decision which was most likely based on ignorance and/or a desire to protect the motor industry as opposed to what is or isn’t classified as a bicycle which is in any case somewhat subjective.
Those decisions were first that as the motor would only be to assist the rider, power could only be applied when pedalling. That is entirely logical, since if the motor drives without pedalling, one is not cycling but motoring. Second that there would be an assist speed limit to keep within bicycle bounds.
This second one is contentious, since it is so dependent on national views and circumstances. In Japan cyclists have to by law leave the road in many crowded city areas and share the pavements, so low cycling speeds are common there. They set the 25 kph assist limit and also a severe continuous power phase down from 15 kph (9.4 mph).
The EU copied Japanese law but without the severe power phase down, since the 25 kph assist limit matched the common cycling speeds in their cycling countries like The Netherlands, Denmark and Germany.
The UK law was the toughest of all initially, a real 200 watt limit and a 12 mph assist cutoff. That assist limit was increased to 15 mph in the 1980s to match EU law and then again slightly to 15.5 mph to make an exact match. Eventually 32 years later we got the extra 50 to reach a 250 watt rating.
The problem almost unique to the UK since about 1980 is that many now regard a typical cycling speed as 20 mph, so there's now a mismatch between the law and many cyclist's views.
.