RARE EARTH MAGNETS SUPPLY RISK TO INDIA
Rare earth magnets, low in cost but critical in function, could emerge as a key supply-side risk for India's automotive sector if China's export restrictions and delays in shipment clearances persist, Crisil Ratings said in a statement. 'The supply squeeze comes just as the auto sector is preparing for aggressive EV rollouts. Over a dozen new electric models are planned for launch, most built on PMSM platforms,' Crisil Ratings Senior Director Anuj Sethi said.
While most automakers currently have 4-6 weeks of inventory, prolonged delays could start affecting vehicle production, with EV models facing deferrals or rescheduling from July 2025, he added. A broader impact on two-wheelers and ICE PVs may follow if the supply bottlenecks persist for an extended period, Sethi said. 'The shortage of rare earth magnets is forcing automakers to reassess supply-chain strategies. Despite contributing less than 5 per cent of a vehicle's cost, these magnets are indispensable for EV motors and electric steering systems,' said Crisil Ratings Director Poonam Upadhyay. Automakers are actively engaging with alternative suppliers in countries such as Vietnam, Indonesia, Japan, Australia, and the US, while also optimising existing inventories, she noted.
Rare earth magnets are integral to Permanent Magnet Synchronous Motors (PMSMs) used in EVs for their high torque, energy efficiency and compact size. Hybrids also depend on them for efficient propulsion. In internal combustion engine (ICE) vehicles, the use of rare earth magnets is largely limited to electric power steering and other motorised systems. In April this year, China, the world's dominant exporter of rare earth magnets, imposed export restrictions on seven rare earth elements and finished magnets, mandating export licences.
The revised framework demands detailed end-use disclosures and client declarations, including confirmation that the products will not be used in defence or re-exported to the US. With the clearance process taking at least 45 days, this added scrutiny has significantly delayed approvals.
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