China's rare earth curbs threaten India's auto sector, EV production
India's auto industry faces disruption as China restricts rare earth magnet supplies, crucial for EVs and other components. Despite embassy endorsements for some importers, China's commerce ministry hasn't approved shipments, impacting various sectors beyond automobiles. Diplomatic efforts are underway to resolve the issue, which stems from China's export controls on rare earth elements.
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India's auto industry remains under threat due to China having restricted the supplies of critical rare earth magnets , despite nine component makers having had their import applications endorsed by the neighbouring country's embassy. Supplies have not resumed as China's commerce ministry has still not given its approval. The magnets are essential for electric vehicles as well as other key components such as gear systems and drive trains.Indian authorities are in the process of reaching out to their counterparts in Beijing via diplomatic channels to secure meetings for a dialogue to resolve the issue, people aware of details told ET.There's been a halt in rare earth magnet imports in the last two months, and any further delay risks severely disrupting automobile production, the industry has told the government.'While the value of imports compared to the industry size is minuscule, vehicles cannot be manufactured even if we are short of one component where a rare earth magnet is being used,' an auto executive said.The Society of Indian Automobile Manufacturers (SIAM) told government officials last week that depleting inventories of rare earth magnets may lead to disruptions in production if the issue is not resolved within the next few weeks.India imported 870 tonnes of rare earth magnets valued at ₹306 crore in FY25.The shadow looms over other industries as well, another executive said. 'Everyone is affected,' he said. 'It is not limited to automobiles, but impacts all manufacturers making a product involving electric circuits, be it equipment required in the aerospace, clean energy or electronics industries.'India isn't alone. Chinese curbs have hit industries in the US, Germany, Japan, and others as well. Beijing announced export controls on medium and heavy rare earth-related items with a view to 'safeguarding national security' on April 4, in response to US President Donald Trump's tariffs.China accounts for about 70% of global rare earth metals mining and nearly 90% of production. Export controls have been imposed on samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium by China. The issue is complicated by the tense business and political relationship between India and China, experts said.Of the 17 Indian auto component manufacturers that submitted applications, the Chinese embassy in India has endorsed the mandated end-user certificate (EUC) for nine of them.These include Continental Automotive, Hitachi Astemo, Mahle Electric Drives, Varroc Engineering , and Flash Electronics, as per an internal presentation made by the auto industry to government authorities on May 28.Applications of eight others—including Minda Instruments, Nippon Audiotronix, and HMC MM Auto—are pending with the Chinese embassy.The April 4 notification mandated exporters that ship such items to seek a licence from China's commerce department after getting an EUC from the buyer.
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