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Once-ambitious Ryder plans for electric vehicles with Chanje dissolves into lawsuit

When Ryder (NYSE: R) announced in November 2018 that it had agreed to acquire China-made electric vehicles from a company called Chanje, what it didn’t say is that an earlier deal with that supplier already was showing signs of trouble.

The relationship between Chanje and Ryder had what looks like its death knell this week when Ryder, in the U.S. Southern District Court for Florida, filed suit against Chanje for several years of underdelivering the number of vehicles it was going to produce and not paying back promissory notes.

But the details in the lawsuit show that problems between the two companies go back before that 2018 announcement and other signs that all was well, though there was no hint of those problems at the time.

Chanje is the U.S.-based representative of China-based FDG Electric Vehicles Ltd., a China-based company that was to build the vehicles that were sold by Chanje. The first purchase order by Ryder was for 125 vehicles and was signed in June 2017. The price per vehicle was set at $35,000. Ryder sent Chanje $4.375 million. 

The vehicle was described by Ryder in a press release as an “all-electric large delivery style van, a medium-duty truck equipped to haul up to 6,000 pounds and up to 580 cubic feet of cargo, all with zero tailpipe emissions.”

But by December 2017, only 22 Chanje vehicles had been delivered. (Three more were delivered later.) Adding to the already deteriorating relationship is that Ryder mistakenly sent Chanje the full price of the 22 vehicles in December, apparently overlooking that it had already paid — in the $4.375 million payment — all but $10,000 per vehicle for the commercial vehicles it received, according to the lawsuit.

“Since March 2018, Ryder has made repeated requests that Chanje reimburse the (o)verpayment amount, but Chanje has advised Ryder that it does not have the cash available to reimburse Ryder,” the suit says. Chanje never delivered the balance of the 125-vehicle order. 

The lawsuit says Chanje did not deny that there was overpayment. “Following Chanje’s failure to perform, Ryder terminated the 2017 Purchase Order with respect to the remaining 100 vehicles that had not been delivered,” the suit said.

Yet even as these failures to perform problems were developing, Ryder went in on another deal with Chanje. In the November 2018 announcement, Ryder said it had reached agreement with Chanje and FedEx (NYSE: FDX) for a leasing and maintenance agreement for 1,000 electric vehicles that would be leased to FedEx through Ryder’s ChoiceLease product offering. The vehicles to be deployed through the FedEx deal would all be in California, according to the press release published at the time of the announcement. 

Notably, the Ryder announcement at the time did not mention the earlier 2017 purchase of 125 vehicles that had gone sour. It also did not mention an announcement from just a few months earlier, in June 2018, that Ryder had put reservations in for an additional 500 vehicles from Chanje. It made these two 2018 commitments even though, according to the lawsuit, Chanje was not delivering on its initial 125-vehicle commitment. (The June transaction was defined as a “reservation” of vehicles, but the November public statement used the word “purchase.”)

In a mid-2019 press release touting its designation as a “Green Supply Chain Partner” by Inbound Logistics, Ryder again discussed its contractual arrangements with Chanje, even though the lawsuit makes clear that the relationship at that point was in shambles.

In February 2019, Chanje was the borrower in a $770,000 promissory note issued by Ryder, with FDG as the guarantor, according to the lawsuit. That money was to account for the overpayment. 

The suit said repayment has been made for $500,000 on that promissory note. But payments beyond that have stopped. 

There was then a second promissory note, this time for $3.5 million in connection with the undelivered vehicles from the 2017 transaction. The lawsuit says that none of that money has been repaid.

The order for the FedEx agreement is part of the lawsuit. According to the suit, Chanje was to deliver 700 vehicles as part of the deal with FedEx, and the price to be paid would have deducted from it the $3.5 million to settle the promissory note. When Chanje didn’t deliver any of the 700 vehicles ticketed for FedEx, the $3.5 million in the promissory note became due. 

“Defendants have failed to pay the principal amounts of the two promissory notes upon their coming due,” the lawsuit says.

The lawsuit said Chanje “committed to pay some of the outstanding balance by the end of January 2021,” but that promise was not fulfilled either.

A spokeswoman for Ryder declined to answer emailed questions from FreightWaves, including why Ryder continued to try to do business with Chanje even after the supplier of the electric vehicles quickly showed, according to the lawsuit filing, an inability to meet its contractual obligations. 

The current status of Chanje is not clear. An email to its general information and press email address was not responded to by publication time. The company has continued to post to its blog as recently as this week. But it has not published a news release in more than a year. Chanje did publish a release regarding the Ryder/FedEx deal back in November 2018.

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