China’s Rare Earth Export Curbs Pose Significant Threat to India’s EV Supply Chain, ET Auto

To mitigate the shortfall, some Indian OEMs are exploring the possibility of importing fully assembled motors from China.India’s electric vehicle (EV) sector is staring at a potential supply chain crisis as China’s tightening export controls on rare earth magnets threaten to disrupt the production of critical EV components, according to a recent Jefferies report. The report highlights that several Indian companies are struggling to import magnets — crucial for EV motors — from China, which dominates over 90 per cent of the world’s magnet supply. With existing inventories depleting fast, Indian manufacturers fear a severe disruption in motor production, potentially stalling the growth of the EV sector.“Industry is facing a challenge in importing magnets from China, and EV motor production could be at risk once existing inventories are exhausted,” the report stated.

Supply Risk Spreads Across Sector

The Federation of Automobile Dealers Associations (FADA) echoed similar concerns in its monthly vehicle sales update. It warned that supply-chain headwinds, such as rare earth constraints and global geopolitical tensions, are dampening urban consumer sentiment and pushing up input costs.

To mitigate the shortfall, some Indian OEMs are exploring the possibility of importing fully assembled motors from China. However, this alternative is fraught with challenges — including major supply chain reconfiguration, potential loss of domestic value addition, and the need for fresh homologation approvals under Indian regulatory norms. This could jeopardise eligibility for Production-Linked Incentive (PLI) schemes.

Government Steps In

In response, the Indian government is reportedly in talks with industry stakeholders to build strategic stockpiles of rare earth magnets. Fiscal incentives are also being considered to encourage domestic production of these vital components, according to a Reuters report.

While rare earth elements (REEs) are not geologically scarce, their concentration and refining complexity make supply highly dependent on China. As of now, China controls nearly 70 per cent of global REE mining and 90 per cent of refining and magnet production.

With export approvals now required even for automotive-grade magnets, China’s restrictions — announced in April citing national security — are already adding uncertainty and delay in procurement. If disruptions intensify, India’s EV transition could be slowed significantly in the coming months.

• Published On Jun 6, 2025 at 05:18 PM IST

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