Major automakers are moving aggressively to take control of the supply chains needed to produce electric vehicles at scale -- and that's creating intriguing opportunities for auto investors. In this Motley Fool Live video, recorded on Dec. 9, Industry Focus host Nick Sciple and Motley Fool senior auto specialist John Rosevear took a closer look at a recent deal between General Motors (GM -1.78%) and MP Materials (MP -2.32%), how it fits into GM's massive push to go "all in" on EVs, and why other automakers might want to cut deals with MP Materials as well.
A transcript follows the video.
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Nick Sciple: GM announced a long-term deal with MP Materials to develop, "A fully integrated US supply chain for rare earth magnets to be used in an upcoming EVs." What is the significance of this deal, John?
John Rosevear: We talked about rare earths. These are elements that are used to make magnets. They're not actually rare, it's just that there aren't a lot of them coming out of the ground, or weren't until recently. What GM is doing is locking up supply that isn't dependent on some of the conflict minerals regions like the Congo and so forth where a lot of cobalt comes from. MP Materials, I don't know a lot about them. I do know that an analyst I trust on this stuff said that their CEO is probably the smartest person about rare earth minerals in North America. GM went to the right company and is doing the right thing. The deal here is that production begins in 2023, and they're going to supply magnets and alloys for more than a dozen of GM's upcoming EVs based on its second-generation, what they call the Ultium platform, which is a modular platform for electric vehicles that it's going to underpin most GM products once they go fully electric.
Nick Sciple: MP Materials. One of these companies that came public in the last year or so, I believe it was a SPAC deal, and so they're going to be developing some US-based rare earth supply. The question was, how much demand is there going to be for this? Clearly, when GM and some of these other companies are signing deals as more and more credibility to that business thesis. Again, we've talked about all this EV supply that needs to, folks want to come to market, whether it's from a public policy point of view or from the consumer demand. Point of view to make that happen, you need some of these raw materials and that's going to trickle through to some companies like MP. Potentially could be an interesting investment will see.
John Rosevear: Yes, this analyst's take was that Ford and Tesla should go cut the same deal with MP as well [laughs] because this hasn't changed. I mean, the analysts' fund is long MP I think, but still, this is another thing like with the chips and so forth, we are going to be seeing more deals coming.