This research presents a finite element multi-physics design methodology that can be used to develop and optimise the inherent functions and geometry of an innovative regenerative eddy current (REC) damper for the suspension of B class vehicles. This methodology was inspired by a previous work which has been applied successfully for the development of an eddy current (EC) damper used for the same type of applications. It is based on a multifield finite element coupled model that can be used to fulfil the electromagnetic, thermal, and fluid dynamic field properties and boundary conditions of a REC damper, as well as its non-linear material properties and boundary conditions, while also analysing its damping performance. The proposed REC damper features a variable fail-safe damping force, while electric power is advantageously regenerated at high suspension frequencies. Its damping performance has been benchmarked against that of a regular hydraulic shock absorber (selected as a reference) by analysing the dynamic behaviour of both systems using a quarter car suspension model. The results are expressed in terms of damping force, harvested power, thermal field, comfort and handling, with reference to ISO-class roads. The optimisation analysis of the REC damper has suggested useful guidelines for the harmonisation of damping and regenerative power performances during service operation at different piston speeds.