In a bold move signaling how seriously it views geopolitical and supply-chain risks, General Motors (GM) has instructed several thousand of its parts- and materials-suppliers to eliminate sourcing from China, setting a targeted deadline of 2027 for key items. While this directive spans raw-materials, components and basic parts, the bulk of its rationale centres on bolstering supply-chain resilience, reducing dependency on China, and aligning sourcing more closely with its North American production footprint.

Deepening concern over China reliance and the impetus for change

GM’s decision emerges against an increasingly fraught backdrop of U.S.–China trade tensions, export-controls, tariff uncertainty and global supply-chain disruption. For decades, China has built a dominant role in supplying the automotive industry — from lighting systems, electronics modules and tool-and-die manufacturing to upstream battery materials and rare-earth magnets. Such entrenchment means any external shock — be it export curbs, regulatory escalation or logistics breakdown — can ripple rapidly across automakers’ global operations.

Senior GM executives have publicly cited the need for “supply-chain resiliency” and the desire to source “in the same country where we build the cars” as guiding principles. This reflects a shift from cost-minimisation to resilience-prioritisation. Moreover, the recent flare-up of semiconductor and magnet supply-risk — including export restrictions on automotive chips, disruptions tied to Chinese-owned suppliers such as Nexperia, and rare-earth export tightening — has reinforced the urgency for change.

By pushing its supplier base to exit China-sourced parts, GM is effectively betting that the durability, reliability and geopolitical insulation of supply matter more than marginal cost savings. The 2027 deadline for some suppliers reflects that GM believes the shift must happen rapidly, not gradually, to insulate its 2028-onwards production horizon from further supply-chain shocks.

Why China is being dethroned in GM’s sourcing strategy

Several specific factors explain why GM is accelerating the pull-out of China from its supply-chain portfolio. First, the worsening U.S.–China relationship means China-based components increasingly carry geopolitical risk. For example, China’s export controls on rare-earth magnets and chips have left the auto industry exposed. GM has sought domestic alternatives to Chinese-sourced rare-earths, and its early investments now give it a competitive edge.

Second, China’s dominance in automotive electronics and tooling means that many suppliers are deeply embedded there, creating systemic vulnerability. Reshoring or “China-plus-one” strategies require time and investment, but GM appears willing to move quickly because the cost of inaction is rising. As one industry voice put it, decades of sourcing cannot be undone in just a few years without heavy effort.

Third, U.S. political and regulatory pressures increasingly favour domestic and allied-country sourcing — a concept often termed “friend-shoring” or “ally-shoring.” By moving supply chains closer to North America (or to partner countries), GM seeks to align with this trend and hedge against possible punitive tariffs or export curbs.

Fourth, the business case is increasingly clear: GM’s earlier effort to lock in U.S. sources for rare-earth magnets and synthetic graphite for EV batteries demonstrates how forward-looking sourcing decisions can transform risk into advantage. These earlier moves now serve as blueprint for wider component sourcing realignment.

How GM’s supply-chain overhaul is unfolding in practice

GM’s supply-chain directive is being implemented through multiple levers. It has told suppliers to find alternatives to Chinese raw materials and parts, with the ultimate goal of removing China-sourced components entirely from certain supply-streams by 2027. While the directive began late in 2024, it gained intensity in 2025.

Practical execution involves several components: mapping current supplier exposure to China, identifying alternative locations (North America, Mexico, other Asia-Pacific jurisdictions excluding China), investing in re-tooling or approving new sourcing lanes, and aligning production footprint with sourcing footprint. GM is prioritising parts destined for its North American vehicle production operations — making the sourcing shift integral rather than peripheral.

Sourcing items under scrutiny include not just high-tech battery materials, but “basic components and materials” such as lighting modules, electronics assemblies or tooling parts that have traditionally flowed from China. GM’s purchasing chief has emphasised that the days of simply picking the lowest-cost country are over; instead, visibility, control and alignment matter.

However, GM also acknowledges that rewiring supply chains is expensive and complex. Supplier executives note that some parts networks are highly China-entrenched over 20–30 years, and changing them over a few years is no small feat. Still, GM is signalling it will lean into the heavy-lifting now to reduce systemic risk later.

Broader implications for GM and the industry

GM’s directive has significant implications: for its cost-structure, competitive positioning and supply-chain ecosystem. On the cost front, moving sourcing out of China (or opening new sourcing lanes) can mean higher labour, logistics or capital costs in the short term. But GM is calculating that the cost of disruption or sudden supply-shock is far greater than incremental cost savings.

For competitive positioning, GM may gain a resilience premium: by aligning its supply-chain to lower-risk geographies, it can claim fewer production interruptions, better margin visibility and stronger assurance for customers and investors. GM’s early bets on domestic rare-earth supply have already yielded strategic positioning benefits, and its broader sourcing shift could create further advantage.

For the industry, GM’s move is both signal and precedent. If one of the major global OEMs is pushing thousands of suppliers to pull out of China, other automakers and tier-suppliers will feel the ripple effects. The broader trend toward supply-chain diversification, shorter sourcing distances, and friend-shoring is likely to accelerate.

At a strategic level, GM’s approach reflects the convergence of three forces: the transition to EVs (which places new demands on materials and electronics supply-chains), intensified geopolitical risk (especially premiums on Chinese-sourced components) and a global regulatory move toward local sourcing. GM is attempting to get ahead of all three simultaneously.

The risks GM must manage as it rewires sourcing

Despite the strategic rationale, GM faces several execution risks in this supply-chain transition. One major challenge is supplier capacity: alternative sourcing may be slower, more costly, or lower-volume initially than China-based supply. Given decades of supply-chain entrenchment, ramp-up of new suppliers and geographies may lag GM’s ambitious timelines.

Another risk is cost inflation. Localising sourcing or shifting to higher-cost geographies raises unit costs and may squeeze margins in the near term; this means GM will need to justify the move via productivity gains or by capturing downstream value.

Also, the global automotive industry is still tightly inter-linked: even if a supplier is physically outside China, many upstream inputs may still have China-sourced content. The “China-plus-one” shift sometimes ends up being “Chinaissimo-two” if the hidden inputs remain China-origin. Research shows that even firms relocating sourcing often still depend on Chinese upstream suppliers through regional networks.

Finally, GM must manage transition risk – tying off old suppliers, ramping new ones, and ensuring quality and delivery standards are maintained. Executive commentary acknowledges that the rewiring cannot happen overnight and that the early years will be the most challenging.

Why the timing matters now

The convergence of several trends makes GM’s timing particularly significant. Trade tensions between the U.S. and China have reignited, export-controls on critical materials and components have increased, and global automakers are under pressure to support domestic manufacturing and align supply with production footprints. The recent chip and magnet supply concerns underscore the fragility of long-established supply chains.

Furthermore, the transition to EVs and autonomous-vehicle electronics has put new pressure on supply chains for batteries, magnet materials, sophisticated electronics and software modules. Many of those parts currently flow through China or are processed there. GM’s move to pull sourcing out of China anticipates these structural shifts and positions the company to meet them from a stronger starting point.

GM is trying to shift from reacting to shocks to proactively insulating itself from future supply-chain ruptures. By setting firm deadlines, mobilising suppliers and signalling strategic intent, the automaker is aiming not just to defend, but to reposition its sourcing model for a more volatile world.

(Adapted from MarketScreener.com)