General Motors' EV supply strategy faced challenges with obtaining semiconductors and battery materials © Photo by Nic Antaya for The Washington Post via Getty Images
General Motors' EV supply strategy faced challenges with obtaining semiconductors and battery materials © Photo by Nic Antaya for The Washington Post via Getty Images

How GM's new procurement strategy aims to overcome sourcing challenges

4 August 2022

General Motors (GM) has detailed a new procurement strategy involving localised supply chains to overcome roadblocks in its electric vehicle (EV) strategy.

The carmaker said it would focus on sourcing from North America in response to challenges obtaining semiconductors and raw materials for EV batteries.

It said it was facing a “unique and dynamic market” caused by ongoing disruption but was targeting 1m units of annual EV capacity in North America by 2025.

In an earnings call Mary Barra, chairman and CEO of GM, said the company had been operating at lower volumes due to the semiconductor shortage, but was now ramping up EV production. 

To enable this the company's procurement strategy will concentrate on local supply chains and direct sourcing, including binding agreements to secure all battery raw materials required for its 1m unit target.

Long-term deals will see the construction of a raw material factory in Canada, the sourcing of lithium from Livent in South America, and the sourcing of key battery materials from LG Chem plants in North America.

Barra said: “This is a truly unique and dynamic market that presents both challenges and opportunities for GM… our supply chain must be even more scalable, sustainable, and resilient. To that end, the team is building on existing supplier relationships and forging new ones. And for certain commodities, we will direct source up to 75% of our needs through 2030 with a focus on North America.

“We think this strategy will mitigate risk, drive down costs and help us deliver upside volume opportunities… We are adapting, changing, and innovating to execute our pivot to EVs… As we move forward, we will increasingly localise our supply chain just as we have localised battery cell production.”

A GM spokesperson told Supply Management the company had a strategy “to pursue direct sourcing of certain commodities – to drive down risks further, and support further volume growth”.

They added this was “in addition to, or in combination with supply agreements, investments and other types of ventures already secured or in process”.

Localisation was another part of this strategy, the spokesperson confirmed. “This starts with battery cell production – which begins very soon in the US at our Ultium Cells joint venture, which will open the first of four planned cell plants.

“It extends into the supply chain as well – the agreements... include a focus on increased localisation going forward. All of this targets making the EV supply chain more secure and sustainable, as well as more North American focused.”

GM’s second quarter EBITDA was $2.3bn, compared to $4.1bn in the same period last year.

GM was among carmakers forced to shut down factories last year due to the semiconductor shortage.

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