India's automotive ride might be slowed by the persistent lack of rare earth magnets. If China's export restrictions and delays in shipment clearances continue, the affordable but essential rare earth magnets—particularly for electric vehicles and traditional internal combustion engine vehicles—might become a major supply-side threat to the nation's automotive industry.

According to a Crisil Ratings report, any disruption to the rare earth magnet supply chain that lasts longer than a month might have an impact on electric vehicle launches, production, and the overall growth trajectory of the Indian automobile industry. This projection arrives as the population of Indian businesses seeking rare earth magnet procurement licenses from China has increased significantly in two weeks. According to a report, the number of businesses on the waitlist has grown from 11 to 21 in two weeks. Bosch India, Marelli Powertrain India, Mahle Electric Drives India, TVS Motor, and Uno Minda are some of the prominent firms in this group.

Permanent magnet synchronous motors (PMSM), which are widely used in electric cars because of their high torque, energy efficiency, and small size, rely on rare earth magnets. They are also used by hybrid cars for effective propulsion. Additionally, ICE vehicles utilize rare earth magnets for electric power steering and other mechanized functions.

In April of this year, China, which controls 90% of the world's rare earth magnet market, placed export licencing requirements on seven rare earth metals and completed magnets and imposed export limitations. The updated framework requires comprehensive end-use disclosures and customer declarations, including verification that the goods will not be utilized in defense or re-exported to the United States. This action was taken in response to the trade tensions between the US and China.

According to Crisil, the added scrutiny has considerably slowed approvals due to the clearance process taking at least 45 days. The report continues, "And the growing backlog has further slowed clearances, tightening global supply chains." India, which obtained more than 80% of its 540-tonne magnet imports from China in FY25, is now beginning to experience the effects, it continued. Crisil stated, "By end-May 2025, nearly 30 import requests from Indian companies were endorsed by the Indian government, but none have yet been approved by the Chinese authorities, and no shipments have arrived."

The Indian automobile industry's growth momentum could be dampened by a rare earth magnet crisis.

Indian passenger vehicle market volumes are forecasted to increase 2-4% in FY26, while electric passenger vehicle volumes could increase 35-40% from a low foundation. Electric two-wheelers might increase by 27%, outpacing the overall two-wheeler growth of about 10%. However, if the crisis in the rare earth magnet supply chain continues, it may dampen momentum, particularly in the electric vehicle market.

Rare Earth Magnet Crisis: Indian Government and OEMs Employ Two-Pronged Strategy

In response to the rare earth magnet supply threat, the Indian government and the nation's automobile manufacturers are acting in two ways. The immediate goal is to increase strategic stocks, engage alternative suppliers, and hasten domestic assembly within Production Linked Incentive (PLI) plans. The long-term objectives include decreasing import dependency, expediting rare earth exploration, developing local production capacity, and allocating funds for recycling infrastructure.

Read Also: Maruti Suzuki Cuts e-Vitara Production Forecast for First Half of 2025 to 8,200 Units

Get the latest Bollywood entertainment news, trending celebrity news, latest celebrity news, new movie reviews, latest entertainment news, latest Bollywood news, and Bollywood celebrity fashion & style updates!

HOW DID YOU LIKE THIS ARTICLE? CHOOSE YOUR EMOTICON!