Lion Electric sues Nikola Motors over battery pack agreement, stealing customers

Lion Electric (LEV) filed a civil lawsuit against EV maker Nikola Motors (NKLA) in the US District Court for Arizona on March 2. The filing alleges Nikola tried to steal customers after breaking its battery pack purchase agreement with Lion.

The purchase agreement between Lion and Romeo (Nikola)

Although Lion Electric designs, manufactures, and assembles many components, including the chassis, battery packs, truck cabins, and bus bodies for its vehicles, it sought a partner to supply battery packs for its new Lion 8T (class 8) truck.

After entering into a multi-year $234 million purchase agreement with Romeo Power on November 2, 2020, the collaboration was designed to supply battery packs for 296 Lion 8T trucks. As part of the agreement, Romeo was obligated to “sell Lion the battery packs at the prices” established under the contract. Furthermore, Romeo had an “affirmative obligation” to ensure the uninterrupted supply to Lion at all costs.

Following the initial agreement, Lion and Romeo collaborated closely, with Romeo appearing to honor its contract obligations, according to the civil lawsuit. That is, until late May 2022.

The filing says on May 24, 2022, Romeo raised prices by around 65% over the ceiling price stated in the agreement. Things get messier after Nikola acquired Romeo on August 1 after the EV maker became concerned over its own battery pack supply.

Lion Electric files lawsuit against Nikola

Nikola stated on a later M&A call that it would wind down or terminate Romeo’s supply agreements with its other customers within six months.

In an email from October, Romeo claimed it could not deliver the promised battery packs to Lion, therefore rejecting the order and violating the terms of the agreement, the filing states. On December 7, Romeo sent a written notice to Lion alleging technical difficulties as the reason for terminating the agreement. Lion Electric has since begun producing its own lithium-ion batteries.

In its lawsuit filing, Lion Electric says the actions have inflicted “substantial damages,” including the risk of future Lion 8T orders. To make matters worse, Lion is alleging Nikola tried to steal its existing customers, claiming:

Nikola contacted Lion’s existing customers, telling them of Lion’s inability
to acquire Battery Packs for the Lion8T trucks (which, as set forth above, was as a result
of Nikola’s conduct) and offering to sell them Nikola’s electric vehicles in lieu of Lion’s.