Why GM sees U.S. supply chain as key to EV leadership

Between the lines: It's almost as if GM is ripping a page out of rival Henry Ford's early 1900s playbook.

• The industry pioneer bought rubber plantations, timberland, and coal and iron ore mines to reduce costs, boost efficiency and streamline Ford Motor's supply chain.
• In the electric-car era, it's lithium, cobalt, nickel and graphite that are the crucial materials.

The big picture: Many of the minerals essential to EV battery chemistries are primarily mined and processed in China, or by companies within China's sphere of influence.

• The U.S. aims to reduce that foreign reliance through manufacturing tax credits and other EV sourcing requirements contained in the Inflation Reduction Act.
• Every automaker, therefore, has an incentive to onshore their supply chains — or to at least rely on U.S. trading partners instead of China for critical materials.
• That's led to a $175 billion surge in U.S. investments for EV and battery manufacturing by Ford, Stellantis and many others, reversing decades of globalization.

What sets GM apart, however, is the degree to which it's trying to build a vertical supply chain in North America by investing in mining and processing companies.

• The latest example: GM is investing $625 million in a joint venture with Canadian miner Lithium Americas to develop the Thacker Pass project in Nevada.
• As part of the deal, GM agreed to a 20-year off-take agreement for 38% of the lithium produced there.

GM also invested $150 million in Nouveau Monde Graphite (NMG) earlier this year to ensure the supply of graphite active anode material for batteries.

• There has been a string of smaller deals, too, like its recent $10 million investment in a company called Forge Nano that makes battery coatings.

How it works: GM's vertical supply chain strategy has multiple goals, Jeff Morrison, GM's chief procurement and supply chain officer, tells Axios.

• GM wants to ensure it has the battery capacity to produce millions of EVs and the flexibility to pivot to new types of batteries as technology evolves.
• It also wants better visibility to avoid disruptions like the semiconductor shortage that hurt automakers during the COVID pandemic.
• While GM doesn't directly buy a lot of computer chips, they're embedded in systems purchased from suppliers.

During the pandemic, GM realized it didn't know about problems developing at lower levels of its supply chain.

• "A lesson from COVID is you need to be engaged deeper in your value chain in certain areas, and manage it differently," Morrison said. "And when you look at EVs, it's the exact same lesson."

GM's first big move came in 2019 when the automaker formed a battery manufacturing joint venture in Ohio with Korea's LG Energy Solutions to make cells for its initial family of EVs.

• Then GM started diving deeper into the supply chain, investing in mining and processing of battery-grade materials.
• It's partnering with South Korea's POSCO Future M, for example, on a $1 billion plant in Quebec that will produce cathode active material (CAM), a key EV battery material.
• It signed long-term supply agreements to secure various precursor materials like nickel, manganese and cobalt and is co-investing to build a U.S. rare earth magnet plant.

While the IRA has provided "a gigantic tailwind" to GM's ongoing strategy, Morrison worries that government incentives could enable "late-comers" to undercut deals GM has been working on.

The bottom line: Navigating geopolitics — not to mention uncertain consumers and rapidly evolving battery technology — can be dicey for any automaker.

• GM's bet is that its manufacturing scale, coupled with investments up and down the supply chain, will provide a strategic advantage.