Electric vehicle manufacturers in India are feeling the impact of China’s tightened export controls on rare earth metals, a key input for EV components, according to a recent report by Jefferies.
The report pointed out that several Indian companies are encountering difficulties in importing rare earth magnets from China—crucial for manufacturing EV motors. “Based on our conversations with Indian companies, the industry is facing a challenge in importing magnets from China, and EV motor production could be at risk once the existing magnet inventories are depleted,” Jefferies said.
The Federation of Automobile Dealers Associations (FADA) echoed these concerns. In its monthly vehicle data release on Friday, FADA noted, “Global supply-chain headwinds—such as rare-earth constraints in EV components and geopolitical tensions—may dampen urban consumer sentiment and increase cost pressures.”
To navigate the supply disruption, some companies are considering importing fully assembled motors directly from China. However, this option comes with complications. Original Equipment Manufacturers (OEMs) would need to restructure parts of their supply chains, and such motors may require fresh homologation under Indian regulatory standards. This shift could also reduce domestic value addition, potentially affecting eligibility for the government’s Production-Linked Incentive (PLI) scheme.
The crisis follows China’s move on April 4, when it announced new export controls on six heavy rare earth elements and rare earth magnets, citing national security and global non-proliferation commitments. While the new rules don’t amount to an outright ban for the auto sector, Chinese exporters must now secure prior government approval before shipments—introducing additional uncertainty and potential delays.
India’s government is reportedly aware of the escalating supply risks. As per a Reuters report on Friday, discussions are underway with various companies to establish long-term stockpiles of rare earth magnets. The Centre is also likely to introduce fiscal incentives to encourage domestic manufacturing of these critical components.
Despite the name, rare earth elements—particularly lighter ones—are not geologically scarce. However, they are found in dispersed quantities, making extraction and processing both challenging and costly. The global supply chain remains heavily reliant on China, which accounts for around 70% of the world’s mined rare earth elements, and approximately 90% of refined output. China also dominates rare earth magnet production, especially in the segment of heavy rare earths.
With Beijing now tightening its grip further, the supply chain is expected to face more turbulence in the coming months—raising serious concerns for India’s fast-growing EV industry.
