Lion Electric files Lawsuit against Nikola for Terminating Romeo Battery Agreement

Lion Electric Co. sued Nikola Corp. for interfering in its battery contract with Romeo Power, which Nikola acquired in October 2022

A legal conflict has arisen between Nikola Corporation and Lion Electric Company as a result of Nikola's acquisition of battery startup Romeo Power Inc. Lion Electric has accused Nikola of seeking to woo away its clients after Lion's battery supply agreement with Romeo Power was terminated.

In a civil action filed in the U.S. District Court for Arizona, Lion Electric said that Nikola encouraged Romeo Power to hike pricing on an agreed-upon contract for all but 40 of the 296 battery packs Lion had acquired for its Lion 8T Class 8 electric truck. August of 2022 saw the all-stock acquisition of Romeo Power by Nikola.

Lion Electric has accused Nikola of "tortious interference" for originally urging Romeo Power to increase the price of its battery packs by 65 percent and then cancelling the contract after Nikola completed its acquisition of Romeo.

Canadian firm Lion Electric has accused Nikola of contacting its clients to notify them that the batteries will not be accessible and recommended that they purchase Nikola Tre battery-electric vehicles instead. Lion Electric asserted that it had over one hundred unfulfilled orders for the 8T in 2022 and 2023, resulting in severe damages, potential future order risks, and reputational harm.

Nikola has not provided a response to the case, which demands more than $75,000 in damages. Lightning eMotors warned in January that it may file a lawsuit due to a battery pack shortage caused by the termination of its Romeo contract, which negatively impacted medium-duty vehicle deliveries in the fourth quarter.

CFO Kim Brady downplayed Lion and Lightning eMotors' expenses on Nikola's February 23 earnings call. As Romeo was Nikola's sole supplier and battery production shifted from Cypress, California to Coolidge, Arizona, Nikola wrote off $4.3 million worth of Romeo inventory. In December, according to Brady, Lion developed its first battery pack. Lion's spokesperson did not respond to FreightWaves' request for an update on battery pack production. Brady believed that the situation could be resolved without long-term consequences.

Nikola strained to get Romeo. It was difficult to obtain sufficient shareholder approval for the all-stock merger, which many investors believed to be worth significantly more. Romeo granted its largest customer a discount of $110,000 on battery packs. Acquisition of Nikola necessitated manufacturing cost reduction and distribution balance.

After registering a "notice of going concern" with the SEC, Nikola's financial status is continuously scrutinized. In November 2021, the company paid a $125 million fine after founder Trevor Milton was convicted of fraud. While chasing Milton, the company's largest shareholder, Nikola promised to repay the SEC in two equal installments over two years.

According to the company's 10-K filing for 2022, it renegotiated the SEC payment schedule twice, resulting in two $5 million payment reductions in 2022. Nikola paid $1.5 million in March and June, with the remaining amount "subject to SEC ruling." Nikola had $90 million by 2022. With Milton's conviction on three counts of fraud on June 27, the corporation anticipates incurring additional legal fees this year. According to the 10-K, Nikola spent $36.1 million defending Milton in criminal and civil proceedings between 2020 and 2022.