The Indian auto industry is on edge as China’s new export rules on rare earth magnets threaten to disrupt production, especially in the booming electric vehicle (EV) sector. Since April 4, China has mandated special export permits for seven rare earth elements and their magnets, sparking delays in crucial imports.
These magnets, essential for EV motors and hybrid propulsion systems, are mostly sourced from China — which controls over 90% of global magnet processing. India imported 540 tonnes of these magnets last fiscal year, with over 80% coming from China.
In response to this supply bottleneck, a 40-50 member Indian industry delegation is awaiting Chinese government clearance for a visit to discuss the matter. While visas have been issued, approvals for formal meetings with China’s Ministry of Commerce are still pending.
Major automakers, including Maruti Suzuki, are already feeling the pinch. The company has reportedly cut production targets for its upcoming e-VITARA model to 8,000 units by September — down from the initial plan of 26,000 units — due to the shortage.
Although the Indian government has cleared around 30 import applications, shipments are yet to be approved by Chinese authorities. Industry leaders are now urging the government to intervene diplomatically to fast-track approvals.
Rare earth magnets like samarium, terbium, and dysprosium are also critical in other sectors such as smartphones, braking systems, and even missile technologies. A continued shortage could affect not just EVs, but also two-wheelers and internal combustion engine vehicles in India.
Crisil Ratings warns that unless approvals are expedited, supply chain challenges could begin impacting production lines by July 2025, posing a major risk to India’s auto ambitions amid its green transition.
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