GM’S RARE-EARTH GAMBLE PAYS OFF AS CHINA TIGHTENS MAGNET EXPORTS

Last week China introduced new draconian restrictions on rare-earth magnet exports, a reminder of its power to disrupt global supply chains—and cause American manufacturers, including carmakers, to halt production.

American auto companies have long relied on China for the magnets, which are essential for making everything from electric motors to headlights and windshield wipers.

But today, one automaker, General Motors, has less reason to fret.

In 2021, GM made the bold bet of investing in rare-earth magnet production in the U.S., as part of a broader effort to cut its reliance on China for parts, components and materials. As a result, in the coming months, GM is now set to be the only U.S. automaker with a large direct supply of American-made rare-earth magnets from multiple factories.

It has been a risky bet. GM had to commit to long-term purchase agreements with new suppliers, in some cases relatively unproven ones, whose magnets are more expensive than the Chinese ones.

In a car industry that squeezes out every extra cost, paying higher prices can be a big disadvantage—particularly if the U.S. and China end up reaching a trade agreement that results in a freer flow of Chinese rare earths. But right now that possibility appears distant. On Thursday, China introduced even stricter regulations on the export of rare-earth magnets, requiring even companies that make magnets abroad using Chinese rare-earth materials to seek permission from Beijing before exporting.

President Trump, who had planned to meet Xi Jinping at a summit with the Chinese leader later this month, responded to the new restrictions by saying there was “no reason” to meet with Xi. Trump threatened additional 100% tariffs in retaliation, while Beijing on Sunday accused the U.S. of having a double standard and said it would apply the rules flexibly to limit the impact on companies.

Still, the prospect of further magnet disruptions looms large in the auto industry. In May, Ford was forced to briefly idle a Chicago plant that assembles its Explorer SUV because of a shortage of magnets. The following month, a Ford executive said the carmaker was living “hand to mouth” with its supply. Ford declined to comment.

Beijing gradually eased the export of magnets in the following months, after striking agreements with the Trump administration, but continues to tightly control supply. Even ahead of the most recent restrictions, U.S. companies wishing to buy Chinese magnets were required to answer lengthy sets of questions for applications that were often delayed or rejected.

While car companies are scrambling to get hold of non-Chinese rare earths, it takes years to secure rare-earth raw materials, order equipment and build new magnet factories, so it is difficult for auto companies to quickly lock in new supply.

In 2024, Jeep parent Stellantis added a rare-earth supply agreement with Carester, a processing company in France that is building a facility expected to be completed next year. Korean industrial giant Posco announced a deal last year to start supplying magnets to an unnamed North American automaker beginning in 2026.

Few, if any, rivals have announced similar supply agreements with domestic rare-earth magnet producers.

When China clamped down on the supply of magnets last spring, it was “a wake-up call” for the U.S. auto industry and other manufacturers that rely on magnets, RJ Scaringe, chief executive of electric-vehicle maker Rivian, said in September.

For GM, efforts to reduce dependence on China began in the throes of the Covid-19 pandemic.

In 2021, car factories were struggling to stay open as lockdowns in Asia made it difficult for them to get their hands on semiconductors. That prompted Shilpan Amin, GM’s supply boss, to look into sourcing more of its supplies domestically, including rare-earth magnets, even if at a higher cost.

“You start recognizing the lack of resiliency is much more costly,” Amin said.

The only problem: Few companies knew how to make rare-earth magnets in America.

Closer to home

In 2021 GM executives contacted Germany-based VAC, one of the few Western magnet manufacturers to have held on during the 1990s and 2000s, when a flood of cheap Chinese rare earths forced most Western producers to shut.

“We were positively surprised when [GM] came to us and said, ‘We need a plan B,’ ” said VAC Chief Executive Erik Eschen. In December 2021, VAC announced it would build a North American plant to supply GM.

At the same time, GM announced it would also source magnets from MP Materials, the largest rare-earth miner in the U.S. MP wanted to sink a large investment into a new plant that would transform its rare earths into magnets and was seeking an anchor customer. GM signed on.

The U.S. government also helped boost the fortunes of both MP and VAC. The Defense Department relies on magnets for missiles, drones and jet fighters. However, it doesn’t buy enough magnets to sustain a full plant, so it has historically relied on magnet suppliers from Japan and Europe, which in turn rely, in part, on Chinese raw materials.

To secure domestic supply, the government poured funding into the new VAC and MP Materials plants.

“If they’re only supplying the DOD, they’re not going to be here in five to 10 years. But if they’re supplying the DOD and General Motors, then they have a much more stable future,” said Anthony Di Stasio, a senior U.S. defense official, in an interview last year.

VAC’s new South Carolina magnet factory will come online before the end of the year, with most of the output promised to GM.

GM is also set to receive most of the initial magnets produced by MP Materials when it begins commercial production at its first magnet factory later this year. In July, the Pentagon agreed to invest $400 million for a stake in MP, as part of a plan that would see the rare-earth company rapidly increase production. In August, GM also announced a supply agreement with Noveon, a Texas producer of magnets, with deliveries beginning in July.

“This is a big chess game and they are already a few moves ahead of everyone else,” said VAC’s Eschen.

Making up for lost time

In many ways, GM is trying to regain a position it squandered decades ago. In the 1980s, scientists at GM and Sumitomo, a Japanese company, separately invented a new, stronger rare-earth magnet that remains the dominant type today. GM spun off a magnet division called Magnequench that supplied auto, electronics and defense companies.

But soon, China became the world’s dominant rare-earth producer, in part because the country was more willing to tolerate the environmental costs of mining and processing than the U.S. or Europe.

In 1995, GM divested from Magnequench, which was acquired by an investment group that included a Chinese state-run company. Over the following years, Magnequench closed down its American plants and set up production in China. Magnequench’s departure became a symbol of China’s march to dominance of the rare-earths industry.

“Equipment…was decommissioned, dismantled, packaged for ocean transport and shipped to China,” said one former Magnequench employee, who was sent to China to train local employees. “What I helped them with was shortening the learning curve.”

In the interview, Amin, GM’s supply chief, declined to say how much of the company’s total rare-earth magnet demand it can satisfy with domestic production, and whether it will still need to top up from plants in China.

Analysts warn that risks could still lurk in the background.

“GM looks like a genius today because of the way events turned out,” said Willis Thomas, a critical-minerals expert at commodity research firm CRU. “If the events turn the other way, and there is a free-trade agreement that took off all the tariffs and quotas, that has them paying through the nose for something you’re locked into.”

GM is confident it made the right bet.

“That first mover’s advantage should last a while,” Amin said.

Write to Jon Emont at [email protected] and Christopher Otts at [email protected]

2025-10-13T00:35:43Z