In the wake of China’s new export restrictions on rare earth elements and finished magnets, India’s automotive industry is facing mounting uncertainty and potential production disruptions, particularly for electric vehicles (EVs).

Since April 2025, China—responsible for over 90% of global rare earth magnet processing—has mandated special export licenses and stringent end-use disclosures for seven rare earth elements and their related magnets, a move that has already begun to strain supply chains critical to India’s auto sector.

A delegation comprising 40-50 senior executives from Indian auto manufacturers and component suppliers has received visa approvals and is preparing to visit China, but is still awaiting a green light from the Chinese Ministry of Commerce to hold discussions on expediting magnet imports. Despite the urgency, no meeting approvals have been granted so far, and nearly 30 import requests endorsed by the Indian government remain unapproved by Chinese authorities, with no shipments arriving as of June 2025.

The impact is already visible: Maruti Suzuki India, the country’s largest carmaker, has scaled back its production target for the upcoming e-VITARA model, planning to manufacture only about 8,000 units by September—far below its earlier goal of 26,000 units for the same period. The company aims to recover the shortfall later in the fiscal year, targeting 67,000 units, but the immediate risk to EV production is clear.

Rare earth magnets, particularly those containing samarium, gadolinium, terbium, dysprosium, and lutetium, are indispensable for permanent magnet synchronous motors (PMSMs) used in EVs and hybrids, ensuring high torque, energy efficiency, and compact size. While internal combustion engine (ICE) vehicles rely on these magnets mainly for electric power steering and auxiliary systems, the shortage threatens to ripple across the broader automotive landscape if delays persist.

Crisil Ratings has warned that, despite their low cost, rare earth magnets could become a major supply-side risk for India’s automotive sector if China’s export restrictions and shipment delays continue. Automakers currently have 4-6 weeks of inventory, but extended bottlenecks could disrupt vehicle production as early as July 2025, especially for EV models. Prolonged shortages may also affect two-wheelers and ICE passenger vehicles.

China’s revised export framework now requires detailed end-use and client declarations, including assurances that the magnets will not be used in defense or re-exported to the United States. This added scrutiny has extended the clearance process to at least 45 days, exacerbating the backlog and tightening global supply chains.

India, which sourced over 80% of its 540 tonnes of rare earth magnet imports from China in the last fiscal year, is now urgently seeking government intervention to expedite Chinese approvals and exploring domestic production alternatives. However, unless the current roadblock is resolved, the risk of a significant slowdown in India’s automotive sector remains high.

Based On A PTI Report