Choked By China, Rare Earth Crisis Threatens West’s EV Dreams While India’s Bajaj Auto Sounds The Alarm

As China continues to tighten its grip on the global supply of rare earth minerals, the West is scrambling to reduce its dependency on Beijing’s stranglehold. From building recycling systems to investing in alternative tech, countries are urgently trying to find ways to keep their EV dreams alive, without handing over control to China.

The effort spans multiple fronts – securing alternative sources, advancing technologies that require fewer rare earths, and recovering materials from products nearing the end of their life cycle; all the effort one thing is crystal clear – rare earths are essential.

“You can’t build a modern car without them,” notes consulting firm AlixPartners, underscoring just how deep China’s dominance runs in this supply chain.

In a strategic move, the U.S. Department of Defense backed Rare Earth Salts with $4.2 million in September 2024. The Nebraska-based startup extracts rare earth oxides from recycled products like fluorescent bulbs, part of a wider push to reclaim domestic control. Meanwhile, Toyota in Japan is putting money into tech that reduces rare earth use altogether.

And the urgency is real. According to the U.S. Geological Survey, China accounted for 69% of global rare earth production last year and holds nearly half the world’s known reserves. That kind of monopoly has consequences.

AlixPartners estimates a battery-powered EV needs around 550 grams of rare earth-containing components, nearly four times as much as a gasoline car, which uses just 140 grams. In China, more than half of new car sales are either battery electric or hybrids. In contrast, the U.S. market remains largely fossil-fuel driven.

“The pressure to replace Chinese-sourced materials is easing slightly with the slower-than-expected EV uptake in the U.S.,” said Christopher Ecclestone of Hallgarten & Company. “But soon, the first generation of EVs will be ready for recycling. That will create a pool of rare earth materials under Western control.”

Still, only 7.5% of new vehicle sales in the U.S. during Q1 2025 were electric, a modest bump from last year, according to Cox Automotive. And while many of these EVs are assembled in the U.S., the parts still largely come from overseas.

The Critical Battle Over EV Minerals

If one is driving a battery electric car with a single motor, there’s about 1.7 kilograms of rare-earth-loaded components in it. Out of that, 550 grams (roughly a third) are actual rare earth elements. Hybrids using lithium-ion batteries are not far behind, packing in about 510 grams.

But as countries race to secure supply chains, China has once again reminded the world who’s boss.

Back in December, China added cerium to its controlled substances, another rare earth that shows up in EVs (about 50 grams per car). These moves are not symbolic; Chinese companies now need government approval to export these minerals, essentially turning the flow of critical elements into a faucet Beijing can open or close at will.

Interestingly, just after a supposed thaw in U.S.-China trade tensions, three of China’s top rare earth magnet makers got the green light to resume exports to North America and Europe, as reported by Caixin on May 15. But such approvals only show how centralized and fragile the system is.

But here is the problem – there are few, if any, alternatives to China in the near term. Setting up new mines takes years. Processing facilities, take even longer, not to mention the technical know-how needed.

And the grip is tight. According to the International Energy Agency, China controls more than 90% of the refined supply of four magnet-critical rare earths—neodymium, praseodymium, dysprosium, and terbium. These are the elements that give EV motors their muscle.

Go beyond lithium-ion, and things get even more China-centric. Nickel metal hydride batteries, still used in some hybrids, rely heavily on lanthanum – about 3.5 kilograms per vehicle, bringing the total rare earth weight to 4.45 kilograms, or nearly 10 pounds.

“I’d say about 70% of the over 200 kilograms of minerals in a typical EV passes through China in some way,” estimates Henry Sanderson from the Royal United Services Institute. “But it really depends on the model and the manufacturer.”

 

Power Projection, When Recycling Isn’t Enough

However, the fact is that recycling rare earths might sound like a neat fix, but in reality, it’s no silver bullet. The process is tricky, energy-hungry, and takes time – something in short supply as global demand keeps rising and even if the U.S. slows down on electric vehicle (EV) adoption, rare earths are not limited to cars, they are also a major part of national defense.

Take the F-35 fighter jet, for instance. It carries over 900 pounds of rare earth elements, according to the Center for Strategic and International Studies. That’s the kind of weight that no car, electric or not, is competing with.

But China is not only tightening the screws on rare earths. Over the past two years, it has been quietly expanding control over a broader list of critical minerals – materials crucial for tech, defense, and manufacturing.

Back in mid-2023, Beijing restricted exports of gallium and germanium, both essential for semiconductor production. Then came antimony – a metal used to harden alloys, build bullets, make lead-acid batteries, and even in nuclear weapons. A year later, that too was brought under the export lens.

By October, the Chinese State Council had made things crystal clear –  exports of minerals with dual-use potential – military and civilian – are now firmly under watch.

One surprise move – restrictions on tungsten – although it is not a rare earth, but it is designated by the U.S. as a critical mineral. Tungsten is tough – literally – and is used in weapons systems, industrial cutting tools, semiconductors, and even car batteries. In fact, each EV battery typically includes about 2 kilograms of tungsten, according to Michael Dornhofer, founder of consulting firm Independent Supply Business Partner.

But here is where it gets tricky – tungsten is not coming back anytime soon – meaning once it is inside an EV, it’s off the table for recycling for at least seven years and its low quantity per unit may not even make recovery viable.

China produces about 80% of the global tungsten supply, and the U.S. imports more than a quarter of its tungsten from there, U.S. Geological Survey data shows.

“Half of the world’s tungsten is consumed domestically by China, so their supply is locked in,” said Lewis Black, CEO of Almonty, a tungsten mining company. “It’s the other 40%—the part China exports—that the West is now missing out on.”

Black added that a new tungsten mine reopening in South Korea later this year might help cover the needs of the U.S., Europe, and South Korea, at least on the defense front. But what about for sectors like medical tech, aerospace, and autos?

“We just don’t have enough,” he said.

Bajaj Auto Rings Alarm Bells Over China’s Rare Earth Clampdown: EV Dreams May Hit a Roadblock by July

Meanwhile, back home Bajaj Auto has sounded a clear warning – its electric scooter production could face a major hit as early as July if China’s grip on rare earth magnet exports doesn’t loosen up soon.

During its March quarter earnings call, the two-wheeler giant flagged what it called a “significant operational risk.” Inventories of rare earth magnets – critical for EV motors – are dwindling fast, and the company has little clarity on when or if new shipments will come through.

“The rare earth situation is a very difficult one,” said Rakesh Sharma, Executive Director at Bajaj Auto, stating a bureaucratic labyrinth of approvals involving Indian ministries, the Chinese embassy, and local provincial authorities in China. Even after more than 30 industry applications, not a single clearance has been granted. China claims the process takes 40–45 days, but as Sharma put it, “the loop has not closed,” leaving the system in limbo.

If the logjam isn’t resolved soon, Sharma warned that “production will definitely be impaired by July.” And there’s no Plan B – refining rare earths, even though deposits exist in India, needs serious capital and expertise. There’s no short-term substitute.

Rare earth magnets are the nerve center of electric motors and without them, Bajaj Auto’s EV ambitions could stall just as the company is ramping up. With 80% of rare earth supply controlled by China, any chokehold in the chain becomes a global concern. Add to that currency fluctuations and geopolitical friction, and Bajaj is staring at a bumpy road ahead, at least for exports and EV expansion.

Yet, despite the looming uncertainty, Bajaj Auto posted solid numbers for the quarter ended March 31. Net profit rose 6% year-on-year to ₹2,049 crore, beating analyst estimates. Revenue climbed to ₹12,148 crore, a 6% jump from ₹11,485 crore a year ago. Strong domestic demand, a rich product mix, and stable margins helped balance out cost pressures.

Quarterly sales crossed 11 lakh units, powered by consistent demand for motorcycles and three-wheelers. Premium brands like Pulsar and KTM delivered strong performances, keeping EBITDA margins healthy.

For the full FY25, Bajaj clocked a standalone net profit of ₹8,151 crore – up 9% from last year’s ₹7,479 crore. Adjusted for a one-off deferred tax hit of ₹211 crore, profits stood even higher at ₹8,363 crore. Full-year revenue jumped 12% to ₹50,010 crore, on the back of 46.5 lakh unit volumes.

Exports are showing a mixed picture – strong growth in Latin America and parts of Asia, but cautious signals from Africa due to fragile economies. Still, Bajaj outpaced the industry, posting 31% export growth in 30 key markets, led by blockbusters like Pulsar and Dominar.

The company wrapped up FY25 with a ₹7,267 crore operational cash flow, completed a ₹4,932 crore share buyback, and declared a ₹210 per share dividend. Bajaj Auto stock ended at ₹8,873.30 on the BSE, up a modest 0.28%.

The Last Bit,

Now, the real test for Bajaj lies ahead – not in the numbers, but in steering a geopolitical supply squeeze that could decide the pace of India’s electric revolution.

With the trade war between the U.S. and China heating up and rare earths squarely in the crosshairs automakers and policymakers alike are facing a new kind of arms race.

This one is not about firepower, but magnets, motors, and minerals and the clock is ticking; the bottom line is – EVs might be battery-powered, but they still run on geopolitics. And for now, China has the steering wheel.

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