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India’s electric vehicle (EV) ambitions may face a critical supply-side hurdle due to China’s tightening grip on rare earth magnet exports, according to a report by Crisil Ratings.
The agency warned that ongoing delays in shipment approvals and export clearances from China could disrupt automotive production and delay upcoming EV launches if the situation persists beyond a month.
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Rare earth magnets, essential components in permanent magnet synchronous motors (PMSMs) used in EVs and hybrid vehicles, have become a bottleneck in global supply chains following China’s recent policy changes. The magnets are also used in internal combustion engine (ICE) vehicles, though in a limited capacity, primarily in electric power steering and motorised systems.
Crisil highlighted that India imported over 540 tonnes of these magnets in FY24, with more than 80% sourced from China. In April 2025, China mandated export licences for seven rare earth elements and related magnetic products, with stringent conditions including detailed end-use disclosures and assurances that the goods will not be used in defence or re-exported to the United States.
“With the clearance process taking at least 45 days, this added scrutiny has significantly delayed approvals,” Crisil said. “The growing backlog has further slowed clearances, tightening global supply chains.”
As of end-May 2025, nearly 30 import requests from Indian companies had been endorsed by the Indian government. However, none had received approval from Chinese authorities, and no shipments had arrived, Crisil noted.
While most automakers currently have 4–6 weeks of inventory, prolonged delays could start affecting production lines by July 2025. This may lead to deferrals or rescheduling of EV model launches. Crisil also warned of a spillover effect on two-wheelers (2Ws) and ICE passenger vehicles if the bottlenecks continue for an extended period.
According to Crisil’s forecast, domestic passenger vehicle sales are expected to grow by 2-4% in FY26. However, electric passenger vehicle volumes could grow by 35-40%, and electric 2W sales by 27%, outpacing overall 2W growth of 8-10%. But supply tightness could soften this momentum.
In response, both the Indian government and industry stakeholders are pursuing short- and long-term mitigation strategies. These include building strategic inventories, sourcing from alternative suppliers, and accelerating domestic manufacturing under the Production Linked Incentive (PLI) scheme. Long-term efforts focus on developing local rare earth exploration, refining, and recycling capacities.
Notably, China accounts for over 90% of the global rare earth magnet production capacity, creating a strategic vulnerability for multiple industries including automobiles, clean energy, and electronics. Outside China, global supply options remain limited.
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