India’s automobile industry is facing a mounting crisis as China tightens controls on rare earth magnet exports, a move that threatens to disrupt production of electric vehicles (EVs) and key automotive components across the country. Since April 4, 2025, the Chinese government has imposed new restrictions requiring special export licenses for seven rare earth elements and related magnets—materials that China dominates, processing over 90% of the world’s supply.
Supply Chain Disruption Hits Indian Automakers
Rare earth magnets are essential in EV motors, regenerative braking systems, power steering, e-axles, water pumps, and even in conventional vehicle parts like speedometers and ignition coils. Several Indian suppliers have applied for export approvals through their Chinese partners, but no permissions have been granted so far. The resulting shortage has already led to production halts abroad, with Suzuki Motor in Japan suspending Swift manufacturing due to these restrictions.
Industry executives and associations, including the Society of Indian Automobile Manufacturers (SIAM), have warned that Indian automakers’ supplies of rare earth magnets could run out as early as this month, putting the industry at risk of production stoppages. SIAM has urged the government to expedite diplomatic efforts and streamline the complex approval process, which involves multiple steps and endorsements from both Indian and Chinese authorities.
Broader Economic and Industry Impact
The impact goes beyond electric vehicles, affecting all vehicle segments that rely on rare earth magnets for critical components. Higher-end vehicles, which use more sophisticated magnet-based systems, are likely to be affected first. The shortage could lead to:
- Production delays or stoppages for both EVs and ICE vehicles
- Inflationary pressures due to higher magnet costs
- OEMs shifting focus to mid-range or base variants to manage supply constraints
- Increased risk of negative industry growth if disruptions persist
Limited Short-Term Alternatives
While automakers are exploring alternative sources and designs—such as ferrite magnets or magnet-free powertrains—these options come with trade-offs in performance and cost and cannot be implemented quickly. India currently has only a month’s supply of rare earth magnets, and local recycling or alternative sourcing is not sufficient to meet immediate India’s Auto Sector Faces Crisis as China Tightens Rare Earth Magnet Exports—EV Production at Risk
production needs.
Government and Industry Response
The Indian government has begun advising manufacturers to develop alternative supply chains, explore indigenous refining and magnet production, and consider fiscal incentives for domestic manufacturing. Initiatives are underway to commercialize rare earth magnet production, with companies like Midwest Advanced Materials Private Ltd (MAM) expected to begin manufacturing in Hyderabad within six months. However, scaling up to meet national demand will take years.
In the immediate term, the Ministry of Heavy Industries is sending a delegation of auto executives to Beijing to negotiate faster approvals, while industry leaders hope for a diplomatic resolution. India’s embassy has also reached out to China’s Commerce Ministry to expedite the process.
Strategic Risk and Long-Term Outlook
Industry experts warn that India’s heavy reliance on a single supplier for such a critical input is a strategic vulnerability. While government and industry are accelerating efforts to localize rare earth magnet production and diversify supply, the current crisis underscores the urgent need for resilient, self-sufficient supply chains in India’s auto and EV sectors.
