According to a report by Reuters on October 22, according to regulatory documents and information from an insider, a factory in the United States that produces rare earth magnets for electric vehicles has cancelled its long-term supply agreement with the manufacturer. The two parties are currently in arbitration proceedings.
This move highlights the challenges faced by Western companies in establishing domestic production capabilities for rare earth products and reducing their dependence on China. Currently, Chinese-produced permanent magnets account for about 90% of the global total output.
This also reflects how the structure of the American automotive industry has changed since Trump returned to the White House in 2025 and cut federal support for electric vehicles.
In 2023, the German vacuum melting company VAC signed a long-term agreement with General Motors. Under this agreement, VAC plans to supply permanent magnets for General Motors’ electric vehicles through a new factory it will build in South Carolina, USA.
In documents submitted to the U.S. Securities and Exchange Commission last week, Energy Fuels, the energy fuel company acquired by VAC for $1.9 billion in June this year, stated that one of the factory’s customers terminated its supply agreement on July 1. Subsequently, VAC initiated arbitration proceedings against that customer within a few days.
The Energy Fuel Company did not disclose the name of the client, but General Motors disclosed in documents submitted to the U.S. Securities and Exchange Commission this week that a supplier of electric vehicle drive motor components “has filed an arbitration claim against us and sought damages after we terminated a strategic procurement agreement.” General Motors did not specify the reason for canceling the agreement.
The aforementioned informed source confirmed that the customer who canceled the contract with VAC’s American subsidiary e-VAC Magnetics is General Motors.
According to an interview with Reuters by Erik Essen, CEO of VAC, in September last year, the company invested $500 million in building a magnet factory in the United States. The factory started production at the end of last year, with annual production capacity of slightly less than 2,000 tons. Approximately 90% of the products were originally intended to be supplied to General Motors, while the rest was intended for the U.S. government.
U.S. subsidiary of VAC stated that it is seeking compensation for damages through arbitration due to the improper termination of the agreement.
Energy fuel company states: "We have no concerns regarding VAC's ability to achieve commercial success, nor its capacity to produce rare-earth magnets as per customer specifications."
After the Trump administration eliminated incentives and tax benefits intended to support the electric vehicle industry, General Motors has been scaling back its electric vehicle sales operations. This business has long been in a loss-making situation.
In January of this year, General Motors incurred a cost of $6 billion due to the withdrawal of some investment in electric vehicles. Three years ago, when General Motors and VAC announced a supply agreement, VAC stated that the factory would provide supply support for General Motors for at least 10 years, and the products would be used in various vehicle models.
According to documents from the U.S. Securities and Exchange Commission, this dispute first surfaced in April 2026. The energy fuel company stated that it was aware of the dispute during negotiations regarding the acquisition of VAC.
Energy Fuel Company is a company that produces uranium for the nuclear power industry. The company stated that this acquisition will make it one of the world’s largest producers of non-Chinese magnets, whose products are used in aerospace, defense, and renewable energy industries.
VACC supplies magnets to over 1000 customers via production facilities located in Germany, Malaysia, and other countries.
