Rare earth supply puts Indian car production 'on notice'

Introduced in April as a tit-for-tat response to US tariffs, China’s clampdown on the export of rare earth minerals is threatening to deliver a crippling blow to global car production, including in India. With shipments of nearly 2,850 tonnes, India was estimated to be the fifth-largest importer of rare earth permanent magnets and magnet alloys from China last year.

Rare-earth magnets, due to their small sizes and higher efficiencies, are widely used in EV powertrains and in systems across the auto industry, as well as in the production of smartphones, aerospace and other sectors. Over the years, China has monopolised the rare-earth supply chain and today controls 60 percent of the production and around 90 percent of global refining capacity.

Chokehold

China has not completely stopped these magnet exports. However, import approvals are now subject to a complex procedure mandating an end-use declaration confirming the magnets will not be used for military purposes, along with certifications from multiple Indian ministries and the Chinese embassy, as well as the final export clearance from Chinese authorities.

“We first need endorsements from the DGFT (Directorate General of Foreign Trade) under the Ministry of Commerce, then the Ministry of External Affairs. These are then submitted to the Chinese embassy for an endorsement or token number, which is shared with the supplier or exporter in China, who forwards it to their provincial government. After provincial approval, it goes to China’s commerce ministry, which ultimately decides whether to grant the licence,” said a senior industry executive from the auto components industry.

Industry red flags

Bajaj Auto and TVS Motor have already warned of potential production disruptions. “As we speak, supplies and stocks are getting depleted, and if there are no shipments, July production will get seriously impaired,” Bajaj Auto’s executive director Rakesh Sharma said recently.

A Reuters report said auto industry manufacturers told government officials last month that production could stall within days. Incidentally, the impact could extend beyond EVs to internal combustion engine (ICE) cars as well since these magnets are used in various components such as the engine, sensors, steering assemblies and speakers.

The government is now planning to send a team of automotive leaders to China to discuss the restoration of supplies. “We are trying to send a delegation; probably in another 2-3 weeks, they will go,” the minister of heavy industries, HD Kumaraswamy, told reporters recently. However, he noted that government officials would not be part of the delegation.

Reflecting similar anxieties, other nations with substantial automotive sectors have initiated requests for meetings with Chinese officials in recent weeks.

Alternatives?

The heavy reliance on China for critical components is again back in the limelight. Several auto component makers in India – and globally – are all working on alternatives to rare-earth magnet motors. 

“In India, while we are working to speed up the import process, we are also evaluating alternative materials, including ferrite, different grades of magnets, different technologies, and different supply sources,” Sona Comstar CEO Vivek Vikram Singh told investors recently.

“New ferrite-based motors offer both superior performance and a 100 percent indigenous supply chain. This is where India must invest,” said Ankit Somani, co-founder of Conifer.io, a startup building electric powertrains.

Tech Challenges

While alternatives offer a path to reducing dependence on critical materials, they come with challenges, especially in high-performance applications like electric vehicles. Issues like lower power density, lower efficiency, and increased size and weight of motors remain concerns.

For instance, the Sona Comstar CEO said, “The technology is very sound, but the efficiency was not coming to the required levels.”

This experience highlights the critical lesson that complete reliance on any one external source is no longer viable in an increasingly unpredictable global landscape.

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