Rare earth magnet crisis: A dent in Indian auto sector
The Indian automotive sector, particularly its electric vehicle (EV) segment, is grappling with a looming supply-chain disruption due to China's stringent export restrictions on rare earth magnets. These low-cost yet functionally critical components are indispensable for modern vehicles, and their scarcity threatens to impact production, new model launches, and the industry's ambitious growth trajectory.
What are Rare Earth Magnets and why are they critical?
Rare earth magnets are made from alloys of rare earth elements. They are integral to Permanent Magnet Synchronous Motors (PMSMs), which are widely used in EVs for their high torque, energy efficiency, and compact size. Hybrid vehicles also rely on them for efficient propulsion. In Internal Combustion Engine (ICE) vehicles, their use is primarily limited to electric power steering and other motorized systems. Elements like Dysprosium (Dy), Terbium (Tb), Neodymium (Nd), and Praseodymium (Pr) are crucial for these magnets, especially in high-performance applications.
China's dominance and new restrictions
China is the world's dominant exporter of rare earth magnets, controlling over 70% of global Rare Earth Element (REE) production and over 90% of refining capacity. In April 2025, Beijing imposed stricter export controls on seven rare earth elements and finished magnets, mandating export licenses. This revised framework demands detailed end-use disclosures and client declarations, including confirmation that products will not be used in defense or re-exported to the US. This added scrutiny has prolonged the clearance process to at least 45 days, leading to significant delays and a growing backlog that is tightening global supply chains.
Impact on the Indian automotive sector
India, which sourced over 80% of its approximately 540 tonnes of magnet imports from China last fiscal year, has begun to feel the pinch. By the end of May 2025, despite nearly 30 import requests from Indian companies being endorsed by the Indian government, none had received approval from Chinese authorities, and no shipments had arrived.
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