Chinese EV Startup Karma Accused of Stealing U.S. Rival’s Plans

(Bloomberg) -- Chinese electric-car startup Karma Automotive LLC is being accused of stealing vehicle plans from a U.S. company with which it discussed a joint venture.

Michigan-based VLF Automotive, a niche carmaker co-founded by former General Motors Co. executive Bob Lutz, filed suit against Karma in California Superior Court in June. VLF claims it shared its plans for a “luxury Humvee” with Karma last fall as part of a proposed partnership to produce the vehicle for the Chinese market, only to have Karma try to cut it out of the deal.

VLF is asking for at least $18.5 million in damages to cover its investment in the Humvee project and its share of the projected profits.

The lawsuit comes as Karma, which is owned by Chinese auto-parts maker Wanxiang Group, is trying to capitalize on the rally in shares of EV makers such as Tesla Inc. and Nikola Corp., a hydrogen trucking startup that went public as a blank-check company in June. Karma told Bloomberg in early July it had raised a third of the $300 million it's seeking by selling stakes to private equity investors.

Karma Chief Strategy Officer Greg Tarr declined comment on the lawsuit. A lawyer for VLF also declined to comment.

VLF claims that, despite signing a non-disclosure agreement, Karma Chief Executive Officer Lance Zhou used the shared designs to secretly contact the U.S. company's manufacturing partners in an effort to bring the electric Humvee to market in China on its own. According to the lawsuit, Karma was motivated to steal by financial desperation.

Formed in 2014 after Wanxiang Group bought failed luxury hybrid maker Fisker Automotive, Karma has struggled to make a dent in the U.S. market. A revamped version of Fisker's hybrid sedan, the $135,000 Karma Revero, debuted to poor reviews in 2017. The company sold just 1,000 cars last year.

“The combination of dismal sales and unfathomable losses created a vicious financial vortex for the company's owners,” VLF's lawsuit alleges. “This financial reality resulted in the Wanxiang Group putting extreme pressure on Karma's CEO, Defendant Dr. Lance Zhou, to turn the company around using any means possible.”

Fisker founder Henrik Fisker, famed as the designer of the Aston Martin DB9, helped launch VLF in 2012 with Lutz and former Boeing Co. executive Gilbert Villareal. Henrik Fisker also has a separate electric-car venture, Fisker Inc., that plans to merge with a blank-check company late this year. He is no longer associated with VLF.

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