2 days ago
While Rivals Falter, Hyundai Has a Hidden Advantage
Hyundai has reportedly stockpiled a significant supply of rare earths used for an array of car parts as other automakers grapple with China's export restrictions on the elements. China mines 70% of the world's rare earth materials but processes and refines 90% of them. Vehicle parts such as automatic transmissions, throttle bodies, cameras, power steering, speakers, seat belts, lights, and more use magnets primarily made from rare earth materials.
According to an unnamed source who attended a private Hyundai investor call and told Reuters about it, Hyundai's rare earth stockpile can last about a year, eliminating concerns of a near-term supply shortage. China's decision to restrict rare earth and related magnet exports dates back to April, when the country curbed its exports of dysprosium, gadolinium, scandium, terbium, samarium, yttrium, and lutetium rare earth elements by introducing a new licensing requirement. Hyundai reportedly increased its rare earth stockpile recently when the country relaxed its export restrictions, but declined to comment on whether it and its sister company, Kia, personally formed the reserve or if they sourced it from suppliers.
Ford and BMW have already been impacted by the rare earth shortage. In May, Ford halted production on its Explorer SUV at its Chicago plant for a week. BMW said parts of its supplier network were disrupted, but its plants ran normally. Last week, China issued rare earth licenses to suppliers of the top 3 U.S. automakers, including General Motors (GM), Ford, and Stellantis. Some of the licenses are valid for six months. BMW and GM are working on motors with low-to-zero rare-earth content to avoid situations like this, but scaling production while managing costs remains challenging.
"We must reduce our dependencies on all countries, particularly on a number of countries like China, on which we are more than 100% dependent," European Union Commissioner for Industrial Strategy Stephane Sejourne said, according to Reuters. Mathias Miedreich, board member for electrified propulsion at German automotive supplier ZF Friedrichshafen, expressed worries earlier this month that the rare earths bottleneck could resemble the auto industry's computer chip shortage during the COVID-19 pandemic, which subtracted millions of units from manufacturers' production.
On Wednesday, President Trump said: "Our deal with China is done, subject to final approval with President Xi and me," adding that China will supply full magnets and any necessary rare earths upfront. The deal has been described as a framework agreement, but auto industry players in India have urged the country's government to accelerate Chinese approval of a rare earths deal. According to ET Times, Indian auto executives are awaiting confirmation for a meeting with China.
The U.S. auto industry could encounter future troubles with China's rare earth exports, even with the recently announced framework, since China dominates the elements' global supply chain. GM appears to be in one of the best positions to avoid future rare earth export disruptions beyond the immediate term since it formed strategic alliances with two rare earth mineral processing companies four years ago for domestic rare earth sourcing and processing. The alliance's processed rare earth minerals were initially planned for GM's electric cars, and while they're not yet active, they could provide much-needed diversification in the supply chain.
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