Could Electric Vehicle Production Face Disruptions Due to China's Rare Earth Magnet Supply Restrictions?

New Delhi, June 12 (NationPress) Inventories of rare earth magnets may diminish by mid-July 2025 for specific automotive applications, as China has implemented export restrictions and is delaying shipment clearances, according to a report from ICRA released on Thursday.

The automobile industry is currently investigating various contingency strategies, yet each option presents its own set of logistical, regulatory, and engineering challenges, further amplifying the existing uncertainty, the report indicates.

Jitin Makkar, Senior Vice President at ICRA, stated: "The industry, having recuperated from the semiconductor supply crisis of 2021–22 that resulted in a loss of nearly 100,000 units—or approximately 4 percent—from passenger vehicle production, now confronts a new disruption. With China tightening its export controls and delaying shipment clearances, rare earth magnet stocks are anticipated to last only until mid-July 2025 for numerous, if not all, passenger vehicle and two-wheeler applications."

The magnets in question—neodymium-iron-boron (NdFeB)—are valued for their strength and efficiency. They are essential for high-performance automotive applications such as traction motors in electric vehicles (both two-wheelers and passenger vehicles) and power steering motors (in passenger vehicles) for both electric and internal combustion engine vehicles.

In FY2025, India imported roughly $200 million worth of these magnets for automotive and non-automotive purposes, with approximately 85 percent sourced from China.

"While the trade value may seem insignificant, the strategic reliance it signifies is anything but. The uncertainty surrounding supply has created a cloud over production planning. Dependence on China for these specialized materials could disrupt the automobile sector, especially the rapidly expanding electric vehicle segment, if the issue remains unaddressed," Makkar added.

The report also mentions that to alleviate the risk, Indian auto component manufacturers and Original Equipment Manufacturers (OEMs) are exploring various strategies. These include importing fully assembled motors from China, sending rotors—on which the rare earth magnets are mounted—to China for assembly, and then re-importing the completed rotors. They are also seeking to replace rare earth magnets with alternatively engineered materials designed to achieve similar magnetic performance without crossing the threshold that would categorize them as rare earth magnets. However, these alternatives come with their own logistical, regulatory, and engineering complexities.

Implementing some of these alternatives would necessitate speeding up the development, testing, and validation cycles to reduce production disruptions.

The stakes are considerable. As Indian manufacturers strive to secure a reliable supply chain, the issue with critical components like rare earth magnets is their concentrated sourcing location. While this crisis is disruptive, it may also act as a catalyst for innovation and strategic diversification—both in sourcing and in technology, the report concluded.