Lion Electric sues Nikola over canceling Romeo battery contract

Nikola Corp.’s acquisition of struggling battery startup Romeo Power Inc. has spilled into federal court with Lion Electric Co. claiming Nikola tried to poach its customers after canceling a battery supply agreement Lion had with Romeo Power.

In a civil case filed in the U.S. District Court for Arizona, Lion claimed Nikola told Romeo to raise prices on a previously agreed-to contract with Lion for all but 40 of 296 battery packs Lion ordered for its Lion 8T Class 8 electric truck. Nikola acquired Romeo in an all-stock transaction in August 2022.

Lion alleged “tortious interference” by Nikola in first telling Romeo to increase its pack price by 65% and then canceling the contract after Nikola closed the acquisition of Romeo.

Lion Electric alleges Nikola tried to poach its customers 

The Canada-based Lion also said Nikola approached Lion customers to tell them the batteries would not be available, suggesting they purchase Nikola Tre battery-electric vehicles instead.

Lion said it was saddled with more than 100 unfilled orders for the 8T in 2022 and 2023.

“As a result, Lion has and will have incurred substantial damages, not including the risk to future orders and of reputational injury,” according to the suit.

Nikola declined comment on the suit, which seeks more than $75,000 in damages. 

Lightning eMotors hinted in January it might sue over a battery pack shortfall resulting from the cancellation of its Romeo contract that impacted Q4 deliveries of medium-duty trucks.

Nikola on Lion Electric: ‘We’ll be able to work through this’

During Nikola’s fourth-quarter earnings call on Feb. 23, Chief Financial Officer Kim Brady downplayed the Lion and Lightning eMotors claims. Nikola wrote off $4.3 million in Romeo inventory because Romeo will now exclusively supply Nikola. Romeo battery pack production is moving to Nikola’s plant in Coolidge, Arizona, from a Romeo facility in Cypress, California.

Lion planned all along to build its own battery pack internally and completed the first one in December, Brady said. A Lion spokesman did not immediately respond to FreightWaves’ request for an update on battery pack production.

“We believe we will be able to work through this,” Brady said on the call. “We don’t believe there will be any long-term consequences there.”

Nikola’s acquisition of Romeo fraught with challenges

The Romeo acquisition by Nikola has been fraught with problems.

First, there was the irritation of getting enough shareholders to vote in favor of the all-stock merger, which was worth a lot more to Romeo investors when it was proposed than when it finally closed.

Then, there was the revelation that Romeo was discounting battery packs to its largest customer by $110,000 each. Once Nikola owned the company, it had to find a way to take out enough production costs to offset that spiff. 

Nikola SEC fine payments reworked

Separately, Nikola’s finances continue to come under scrutiny following its “notice of going concern” filing with the Securities and Exchange Commission.

The company agreed in November 2021 to pay a $125 million fine related to fraud allegations that later resulted in a criminal conviction of founder Trevor Milton. Nikola agreed to make equal payments to the SEC over two years. It also said it would seek reimbursement from Milton, the company’s largest shareholder.

In Nikola’s 10-K filing for 2022, it revealed it twice renegotiated the payment schedule with the SEC after paying the first $25 million on schedule in late 2021. Two reduced $5 million payments were made in 2022. Now the SEC has agreed to let Nikola pay $1.5 million in March and June with the rest of the payment “subject to determination.”

Nikola accrued the remaining $90 million at the end of 2022. Arbitration with Milton over the SEC fine and other matters is continuing. The company paid $36.1 million from 2020 to 2022 to defend Milton in criminal and civil cases, according to the 10-K. Nikola expects more legal expenses for Milton this year. His sentencing on three fraud counts is scheduled for June 27.

Romeo Power’s trouble stings Lightning eMotors

Nikola files layoffs notice for former Romeo Power battery-making plant

Nikola acquires Romeo Power to secure battery supply

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