The new GMC Hummer EV pickup is just now starting to roll off the production line, and it soon will be followed by a procession of all-electric pickups, SUVs, and even an exotic supercar as General Motors ramps up its $37 billion electrification program.
Today, the largest of the U.S. automakers is heavily dependent on foreign sources for the raw materials, parts, and components going into those vehicles. China, in particular, is a primary source of semiconductor chips and lithium-ion batteries. But not for long. This month, GM announced plans to set up its fifth U.S. battery plant. And it’s looking to domestic sources for crucial ingredients like lithium, cobalt, and nickel.
GM’s Strategy for Future BEV Sourcing
Since just the beginning of the year, the Detroit carmaker has inked a dozen different deals aimed at ensuring that what goes into its BEVs will be sourced from the U.S. and Canada. Shilpan Amin, GM’s Vice President of Global Product Development, Purchasing and Supply Chain, explained the brand’s supply chain strategy earlier this month.
“Our intent is we will have a fully resilient, sustainable, scalable, and cost-competitive supply chain for the entire value chain through a North American-focused supply chain to support all of our EV production,” said Amin during a question-and-answer session with the media.
It won’t be an easy task, at least when it comes to some of the key bits that go into making an EV. Over the years, the U.S. semiconductor industry has largely moved out of the country, primarily to Asia. And there’s only marginal production capacity for lithium batteries, among other key electric vehicle components.
Supply Chain: Sourcing Problems and Future Opportunities
The risk of relying on foreign sources has become all too apparent since the COVID-19 pandemic struck. When automakers slashed vehicle production plans, semiconductor suppliers turned to other customers, especially consumer electronics manufacturers.
As the economy has rebounded, automakers have struggled to come up with enough of those chips, resulting in shortages forcing them to slash production — leaving dealers with often-empty lots. Then there’s the political risk of depending on foreign sources, a concern underscored by worsening relations between the U.S. and China.
“The supply chain has become a real problem,” said Stephanie Brinley, principal auto analyst with IHS Markit. “You really don’t want to rely on a supply chain where (critical parts like) your batteries are shipped. Building things close to where you need them makes a lot of sense,” she said.
According to GM, focusing on local sourcing also permits the company to ensure environmentally friendly processes are used for mining and production.
One of the biggest concerns is ensuring a ready supply of lithium, arguably the single most important element in today’s battery-electric vehicles. One of the deals GM has inked partners it with Controlled Thermal Resources. The California-based company has developed a method to extract lithium from the Salton Sea Geothermal Field. The waters pumped up can then be injected back into the same field.
GM Announces New Collaborations
And earlier this month, GM announced two additional “strategic collaborations.”
MP Materials, another California company, currently operates the only commercial mine in the U.S. producing rare earth elements like neodymium, an essential ingredient in high-powered magnets for BEV motors. MP not only will supply GM with raw materials and alloys but also is setting up a plant in Fort Worth, Texas to produce enough finished magnets for 500,000 motors annually.
GM inked a similar deal with Germany’s Vacuumschmelze, or VAC, which will also provide raw materials and finished magnets. Between the two companies, GM will have enough of the metals and magnets for all of the millions of BEVs it hopes to be selling in the U.S. by the end of the decade.
GM still has a ways to go to ensure that the BEVs it builds in North America will be able to depend on entirely North American sources for raw materials, parts, and components. But it is already getting control of the process, said Brinley.
And that should be good for both the automaker and its customers. “Fundamentally, our strategy is to control our own destiny,” said Amin.
