A rare and costly legal clash has erupted in China’s electric vehicle supply chain, with a subsidiary of auto giant Zhejiang Geely Holding Group taking a battery maker to court over alleged defects that it says triggered sweeping losses.

In a lawsuit filed in the eastern city of Ningbo, Vremt — a Geely unit — is seeking at least 2.31 billion yuan ($330 million) from Sunwoda Electronic Co., accusing the battery supplier of delivering faulty products over a multiyear period. Sunwoda disclosed in a stock exchange filing dated Dec. 26 that it received formal notice of the lawsuit the previous day.

The case lands as China tightens its focus on EV safety, turning what is usually a behind-the-scenes quality dispute into a public courtroom battle.

Claims Span Years of Battery Deliveries

According to the filing, Vremt alleges it suffered damages tied to quality problems in battery cells supplied by Sunwoda between June 2021 and December 2023. The lawsuit contends those defects rippled through the supply chain, affecting vehicles equipped with the batteries.

Sunwoda said it could not immediately determine the financial impact of the litigation. A company representative did not respond to a request for comment.

Investors reacted swiftly. Shares of Sunwoda plunged 11% on Monday, the steepest one-day drop since April, underscoring market unease over the size of the claim and the reputational stakes.

Safety Scrutiny Raises the Stakes

The lawsuit is an uncommon example of a product-quality dispute spilling into public view, but it comes as regulators sharpen their attention on EV battery safety.

Authorities rolled out stricter battery standards around the time of a fatal crash involving Xiaomi Corp.’s SU7 sedan in March, when the vehicle caught fire after striking a concrete barrier with its driver-assist system engaged. More recently, Li Auto Inc. recalled more than 11,000 of its flagship Mega electric vehicles after one caught fire. No injuries were reported.

Against that backdrop, the legal fight reads less like an isolated clash and more like a stress test for China’s rapidly expanding EV ecosystem.

Zeekr Models Said to Be Affected

Vremt supplies battery packs to several Geely brands, including Zeekr and Lynk & Co. The model most likely involved was a Zeekr vehicle, according to Caixin, which cited an unnamed industry source.

The outlet reported that some Zeekr 001 electric sedans experienced slower charging speeds and abnormal battery-capacity degradation in late 2024. Zeekr replaced the battery packs for affected vehicles at no cost to owners, Caixin said.

A Zeekr spokesperson did not immediately respond to a request for comment.

Analysts Question the Scope of the Claim

Sunwoda’s role may complicate the case. The company supplies battery cells but does not design or integrate full battery packs, according to a note from Jefferies analysts led by Kelly Zou. The analysts suggested the problem likely originated in the pack system rather than the cells themselves, noting that Sunwoda’s products have performed reliably in other applications.

They also questioned the scale of the damages sought, calling the 2.31 billion yuan claim disproportionate to the roughly 600 million yuan purchase value of the cells at issue.

Sunwoda reported profit of about 1.5 billion yuan last year and 1.1 billion yuan in 2023. It ranked as China’s sixth-largest battery maker by installed capacity in the first 10 months of this year, trailing industry heavyweights such as Contemporary Amperex Technology Co. Ltd. and BYD Co., according to the China Automotive Battery Innovation Alliance.

As Geely sues Sunwoda for battery issues, the case is poised to test accountability across China’s EV supply chain — and signal how far quality disputes can travel when safety and scale collide.