China’s Rare Earth Export Controls
The Indian automobile sector faces growing challenges due to China’s tightened control over rare earth metals. These metals are vital for manufacturing electric vehicles and advanced automotive components. Indian automakers, including Royal Enfield, have started scaling back on non-essential equipment to cope with supply disruptions. The situation exposes vulnerabilities in global supply chains and marks India’s dependence on Chinese rare earth exports.
China’s Export Restrictions
China has imposed bureaucratic hurdles on exporting rare earth materials. These restrictions complicate and delay the approval process for foreign companies, including Indian automakers. Although there is no outright ban, the export procedures are slow and uncertain. China’s controls target critical minerals such as neodymium, dysprosium, and terbium, essential for permanent magnets used in electric vehicle motors and sensors.
Impact
Indian car manufacturers are reducing rare earth metal use in vehicles to prioritise critical applications. Royal Enfield temporarily removed gear position sensors dependent on rare earth magnets and plans to retrofit them once supplies resume. Other manufacturers have modified vehicle designs to eliminate non-essential components like gear position indicators. These measures reflect the strain on supply chains and the urgency to adapt to material shortages.
Growing Demand for Rare Earth Magnets in India
India’s consumption of permanent magnets has more than doubled in recent years, rising from 12,400 tonnes in FY21 to 28,700 tonnes in FY24. Imports surged by 88% to 53,700 tonnes in FY25. Rare earth magnets, especially neodymium-iron-boron types, are lighter and retain magnetic properties longer than traditional magnets. The increasing demand is driven by electric vehicles and other advanced automotive technologies.
India’s Domestic Production and Processing Challenges
India produces rare earth oxides through IREL (India) Ltd, a public sector unit under the Department of Atomic Energy. It refines ores containing cerium, lanthanum, neodymium, and praseodymium. However, India’s capacity to process these oxides into alloys and magnets is very limited. The technical complexity of magnet manufacturing means India remains reliant on imports, particularly from China, which leads in efficient processing.
Geopolitical and Trade Dimensions
China’s export restrictions partly respond to trade tensions with the US and other countries. In retaliation to US tariffs, China restricted exports of heavy rare earth metals and related materials. Diplomatic talks between India and China aim to ease supply chain issues. The Indian Ministry of External Affairs is engaged in discussions with Chinese authorities to streamline approvals. However, uncertainty persists over the timeline and volume of rare earth supplies.
Technological and Strategic Implications
Rare earth metals are critical to the future of electric mobility and high-tech industries. Supply disruptions risk increasing costs and delaying production in a price-sensitive market segment. The situation puts stress on the strategic importance of developing domestic processing capabilities and diversifying supply sources beyond China. Automakers are exploring alternative geographies to secure rare earth materials for sustainable growth.
| Related | |
|---|---|
