Indian Companies Target Opportunities in Rare Earth Magnet Supply Gap
India's automotive industry faces a crisis, with 21 companies (such as Bosch India, TVS Motor, and Sona Comstar) awaiting Chinese export approvals, with inventories expected to be depleted by July 2025. Maruti Suzuki has cut its e-Vitara production by two-thirds, while Bajaj Auto anticipates a halt in electric scooter production. Heavy Industries Secretary Kamran Rizvi has urged local suppliers to provide feasible timelines, with EY assisting in formulating contingency plans. A report by the Society of Indian Automobile Manufacturers estimates that prolonged supply disruptions could lead to a $2 billion production loss by 2025.
China's dominance in processing over 90% of the world's rare earth magnets, combined with its 2024 export restrictions, has caused a supply chain crisis in India's $240 billion automotive industry. This has disrupted the production of key components like EV motors and sensors.
The problem is made worse by India's limited processing capacity. Even though India has the world's third-largest rare earth reserves, it produced only 2,900 tons in 2024 – about 1.2% of global output. Another weakness is that 60-70% of India's EV parts come from China, forcing the country to change direction.
Indian companies use new technology, recycling, and foreign partnerships to strengthen their local supply chains and become more self-sufficient and secure. A 2025 Crisil Ratings report warns that if India doesn't reduce its need for Chinese rare earths, its auto industry could lose $5 billion annually.
National Critical Minerals Mission (NCMM) and Incentives
To address the crisis, the Indian government launched the National Critical Minerals Mission (NCMM) in 2024, aiming to significantly reduce reliance on Chinese rare earth imports by 2030, aiming to produce 10,000 tons of rare earth concentrates annually. The Heavy Industries Ministry's $1 billion Production-Linked Incentive (PLI) scheme aims to bridge the 20-30% cost gap between Indian and Chinese manufacturing while waiving processing equipment tariffs to lower entry barriers. Companies like Midwestern Advanced Materials plan to produce 500 tons of magnets by 2026, while Indian Rare Earths Limited (IREL) aims for 450 tons of neodymium magnets. IREL faces challenges due to the relatively low proportion of high-value rare earths in its resources and requires approximately $500 million in processing facility upgrades.
Strategic Pivot to Diversify Supply Chains
India is diversifying its supply chain through partnerships with Latin American countries. Brazil's Pera Ema mine received a $170 million investment from India's joint venture mining company KABIL, aiming to meet 20% of India's EV rare earth demand by 2027. Argentina's Susques and Chile's Penco mines secured $24 million from KABIL for lithium-rare earth co-mining. These projects face environmental and indigenous rights challenges, with full production expected to take 5-7 years. A 2025 World Bank report confirms Latin America holds 15% of global rare earth reserves, making it a strategic pivot to counter China's dominance.
Australia's Lynas Corporation, producing about 5,000 tons of rare earth oxides annually, could cover 10% of India's import demand gap from China. India is negotiating with companies like Australia's Iluka Resources to secure a stable supply of 1,000 tons by 2026. In 2024, India suspended a $7 million rare earth oxide export contract with Japan's Toyota Tsusho to prioritize domestic demand, raising concerns about long-term trade relationship impacts.
Rare Earth Market Growth Drivers
India's rare earth market, valued at approximately $40.7 million in 2024, is projected to grow to $62.9 million by 2030, driven primarily by EV demand and defence applications. Dependence on Chinese rare earth magnets is expected to decline from its 2020 peak to 54% by 2025. Strong growth in domestic two- and three-wheeler EV sales is a core demand driver, with the Indian government targeting EVs to account for 30% of new vehicle sales by 2030.
New Opportunities in the Circular Economy
Indian battery recycling company Lohum is expanding its expertise in lithium, cobalt, and nickel extraction to recover rare earths like neodymium and dysprosium from used batteries and motors. In 2024, Lohum processed 5,000 tons of related e-waste, recovering 200 kg of rare earths, with plans to double capacity by 2027. Its low-energy refining process reduces carbon emissions by 40% compared to traditional mining, aligning with India's 2070 net-zero target. Co-founder Rajat Verma stated that the company is negotiating with three Indian motor manufacturers to supply 10% of domestic rare earth magnet demand by 2026.
Driven by the NCMM framework, Latin American mining partnerships, and innovations from companies like Conifer Energy, Lohum, and TOPMAG, India has the potential to become a more resilient rare earth supply chain participant by 2030, targeting 15% of global magnet demand. However, success hinges on overcoming a $7 billion processing investment requirement, closing technological gaps, and addressing environmental challenges.
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