Lion Electric claims Nikola interfered with battery contract, poached customers

Lion Electric is claiming that Nikola intentionally interfered with a battery pack contract, and subsequently, tried to poach Lion’s customers.

On March 2, Saint-Jerome, Quebec-based Lion Electric filed a civil complaint against Phoenix-based Nikola in an Arizona federal court. Lion Electric claims that battery manufacturer Romeo Systems, now owned by Nikola, raised the prices of battery packs despite a contractual agreement that included a ceiling price. The complaint also accuses Nikola of poaching Lion Electric’s customers.

According to the complaint, Lion Electric and Romeo entered into a purchase agreement in November 2020. The $234 million, five-year contract directed Romeo to supply battery packs to Lion Electric for nearly 300 Lion 8T trucks. Per the purchase agreement, both parties contractually agreed on a maximum price.

However, things turned sour in May 2022. Lion Electric alleges that on May 24, 2022, “Romeo unexpectedly reneged on the contractually agreed-upon ceiling price.”

Specifically, Romeo proposed to sell only 40 battery packets out of the nearly 300 needed at the ceiling price. The remaining battery packs would be sold “at a substantially higher price through the end of 2023,” according to the complaint. Lion Electric alleges that Romeo insisted on a final price that is 65% higher than the agreed-upon ceiling price. Romeo cited rising production costs for the sudden price increase.

Lion Electric blames Nikola for Romeo’s about-face.

“Romeo’s sudden refusal in May 2022 to honor the ceiling price and its contractual obligations to Lion was orchestrated by Nikola,” Lion Electric claims in its complaint. “Indeed, according to Nikola’s Form S-4 Registration Statement as filed with the SEC on August 29, 2022, in May 2022, Nikola had become increasingly concerned about Romeo’s ability to consistently deliver battery modules and packs to Nikola.”

Last August, Nikola announced it would acquire Romeo. Lion Electric claims that Nikola “intended for Romeo to supply batteries to Nikola only.” Furthermore, Nikola would “terminate Romeo’s supply agreements with its other customers.”

According to the complaint, Romeo changed its excuse for raising prices just a few days after the acquisition announcement. Lion Electric claims that, at Nikola’s instruction, Romeo said it could not supply battery packs due to alleged technical difficulties. However, Romeo never provided sufficient evidence confirming the alleged technical failures, the lawsuit alleges.

Nikola’s acquisition of Romeo was finalized in October. In December, Romeo sent a written notice to Lion Electric purporting to terminate the purchase agreement based on the alleged technical difficulties. Lion disputed the attempt to terminate the agreement.

Additionally, Lion Electric is accusing Nikola of poaching its customers.

Lion claims that after Nikola directed Romeo to terminate the purchase agreement, Nikola contacted Lion Electric’s customers and told them of Lion’s “inability to acquire battery packs” for its trucks. Nikola offered Lion Electric’s customers to sell them Nikola’s electric trucks instead.

“As a consequence of not receiving the battery packs from Romeo pursuant to the issued purchase orders and future purchase orders to be issued by Lion under the purchase agreement, Lion has been unable to timely satisfy a number of the Lion vehicle orders,” Lion Electric claims in its complaint. “As a result, Lion has and will have incurred substantial damages, not including the risk to future orders and of reputational injury.”

Nikola had not responded to Land Line’s request for comment by the afternoon of March 8. LL