(Montreal) Lion Electric has started an arbitration process with an American supplier who could not respect the conditions of a contract for the supply of battery packs worth 14 million.
The electric bus and truck maker has begun an arbitration process with battery maker Romeo Power, which was acquired in October by electric truck maker Nikola Motor.
Lion Electric claims that Romeo has fallen behind on deliveries of some orders. The company says it has received indications that Romeo may not fully meet its obligations under the contract, signed in November 2020. It has not been possible to obtain a reaction from the acquirer Nikola Engine.
The dispute was disclosed along with Lion Electric’s quarterly results last week. The president and founder of Lion, Marc Bédard, did not want to advance on the possible scenarios at the end of the process. “The arbitration process is very confidential,” he told an analyst who questioned him on the subject. We cannot provide any details about this relationship at this time. »
Lion had no choice but to disclose the information to investors because it could have a “material” impact, but must be sparing of details due to the confidentiality of the process, the spokesperson said. company Patrick Gervais. “We have invested a lot in this contract and we are working to enforce it,” he adds.
Lion Electric wants to produce its own batteries at its Mirabel plant, which is due to come into service “in the coming weeks”. In the meantime, the company must obtain supplies from external suppliers.
The arbitration process, the outcome of which is not yet known, could have an impact on the company’s production, warns Benoit Poirier, of Desjardins Capital Markets. “Short-term deliveries of the Lion 8T [camion] rely on Romeo’s drum sets. »
Change of ownership
The arbitration process comes after electric truck maker Nikola Motor announced plans in August to acquire supplier Lion Electric. The transaction was completed in October.
The darling of investors at the start of 2020, Nikola experienced a thaw on the stock market while its former boss and founder, Trevor Milton, was accused of embellishing the company’s prospects.
In financial difficulty before the acquisition, Romeo Power is Nikola’s largest supplier.
Nikola Chairman and CEO Mark Russell had mentioned to the magazine Forbes that one of the reasons for the transaction was to protect the inventories “so that no disruptive element arises”. “The real reason is strategic, we are taking control of our destiny and repatriating production in-house,” he said.
Members of the electric vehicle industry have had to contend with supply chain disruptions, which have slowed production. This is also the case for Lion Electric.
Without mentioning the Quebec company, Nikola’s chief financial officer, Kim Brady, said Romeo’s “most contracts” were sold below market price. “We’ve been able to step in on a number of those contracts, so we’re putting more attention on simply sourcing Nikola the battery,” she said when unveiling her quarterly results at the start. of the month of November.
Lion shares ended the session down 30 cents, or 6.19%, at $4.55 on the Toronto Stock Exchange.