China's magnet curbs risk halting Indian car production

Reuters

28-05-2025

NEW DELHI, May 28 (Reuters) - Indian auto production could grind to a halt within days due to Chinese export restrictions on rare earth magnets, according to company executives and documents from industry groups, which want the government to lobby Beijing to relax the curbs.
China, which controls over 90% of global processing capacity for the magnets used for automobiles, clean energy and home appliances, enacted restrictions in April requiring companies to obtain import permits from Beijing.
Though a response to U.S. President Donald Trump's tariffs, the export curbs will impact automakers globally. And Indian companies say a disruption in the world's third-largest car market is imminent due to rapidly depleting stocks and the onerous process of obtaining new supplies.
In a meeting with commerce ministry officials last week, the Society of Indian Automobile Manufacturers (SIAM), an industry group, said inventories at auto part makers are expected to run out by the end of May, according to an unreleased document seen by Reuters.
SIAM was seeking the intervention of Prime Minister Narendra Modi's government to help access magnets held at Chinese ports since April 4.
"Starting end May or early June, auto industry production is expected to come to a grinding halt," SIAM said in the document, which was presented during a May 19 meeting attended by executives from Maruti Suzuki, Mahindra & Mahindra and Tata Motors.
While China has cleared exports from some magnet producers, including Volkswagen (VOWG.DE), opens new tab suppliers, three auto industry executives told Reuters they fear strained relations between Beijing and New Delhi could hurt India's chances of getting quick approvals.
The company officials asked not to be identified due to the sensitivity of the issue.
When asked about the magnet restrictions' impact in India, China's embassy in New Delhi said it was "actively facilitating and streamlining compliant trade" in accordance with legal and regulatory requirements.
"China's lawful imposition of export controls on these items aims to better safeguard national security and interests," it said in a statement.
Mahindra (MAHM.NS), opens new tab, Maruti (MRTI.NS), opens new tab, Tata (TAMO.NS), opens new tab, SIAM and India's commerce and external affairs ministries did not respond to requests for comment. Neither did the Auto Component Manufacturers Association of India (ACMA), which also attended the meeting.
While rare earth magnets are a crucial component in electric vehicle motors, they are also required for parts like power windows and audio speakers used in traditional cars.
And though the measures imposed by Beijing are meant to focus on high-performance exports, shipments of low-end magnets are also being held up at ports due to confusion around implementing the restrictions.
China's exports of permanent magnets fell 51% year on year to 2,626 tons in April, the first month of data following the curbs, customs data shows.
India's auto sector imported 460 tons of rare earth magnets, mostly from China, in the fiscal year ended March 31 and expects to import 700 tons worth $30 million this year, according to industry estimates.
"Though the cost of imported rare earth magnets is miniscule in vehicles, risk is vehicles cannot be manufactured even if we are short of one component," SIAM and ACMA said in a separate document submitted to the Indian government.
Indian companies are worried by the complexity of an import process that requires approvals from Indian ministries and documents including so-called "end-use certificates" stating the magnets are not for military purposes, the SIAM document said.
Those documents must be verified by the Chinese embassy in New Delhi and sent to companies' Chinese suppliers whereafter Beijing issues a licence, it added.
India should endorse applications from importers "within hours", the SIAM document said, and push the Chinese embassy and commerce ministry to approve them "on an urgent basis".