The auto industry’s rare earth problem, and what comes next
In a reprieve for Indian automakers, supply of rare earth magnets from China has begun easing
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Sep 09, 2025, 14:29 IST2 min
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After months of uncertainty, India’s automakers can breathe a sigh of relief.
It all started in April this year, after China, the world’s largest maker of rare earth magnets—a key component in automotive manufacturing—decided to impose sanctions on their export, following the trade war with the US. While that remained the trigger, China also chose the opportunity to revisit exports to India, enforcing stricter sanctions on its neighbours with whom geopolitical tensions had been simmering.
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The decision meant that India’s automakers, the fourth largest in the world, were staring at a complete halt in production, particularly ahead of the festive season that accounts for about 40 percent of the annual sales.
Now, as tensions between the Asian giants undergo a reset, the supply of rare earth magnets has also begun easing, giving a big reprieve to India’s automakers. China has 40 percent of the world’s deposits of rare earth minerals. As much as 68 percent of all rare earth processing is done in China. And the country accounts for 92 percent of the global supply of rare earth magnets.
“What I can tell you is that we are willing to strengthen dialogue and cooperation with relevant countries and regions to jointly maintain the stability of the global industrial and supply chains,” Mao Ning, a spokesperson of China’s foreign ministry, said on August 19.
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“Production and shipments recommenced on August 20, marking a faster-than-anticipated return to full capacity,” Bajaj Auto, India’s third-largest two-wheeler maker, said in a statement. Bajaj, which is India’s largest electric two-wheeler maker, had been vocal about the supply halt since the crisis began. “Bajaj Auto has secured a sufficient supply of rare earth magnets and other key materials to ensure availability during the upcoming festive season,” it added.
Magnets made from rare earth elements are far more powerful than conventionally made magnets and, therefore, are of critical importance in aerospace and electric vehicles. The most popular rare earth magnets are neodymium-iron-boron and samarium-cobalt. Magnets are used in components such as power steering motors and air conditioning systems. India’s automobile sector imported about 870 tonnes of rare earth magnets last year.
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China currently has the largest deposits of rare earth elements at 44 million tonnes. India has about 6.9 million tonnes. But it is in the mining and refining process that China invested heavily in the past, allowing it to refine as much as 90 percent of the global supply and giving it a stranglehold over the minerals.
“In the medium-to-long term, significant investments in alternative motor technologies will be necessary for automakers to reduce their dependence on rare earth magnets,” says Harshvardhan Sharma, group head, automotive tech & innovation group at Nomura Research Institute. “Given the scale of the issue, this is unlikely to be a silver bullet in the short term but could help create a more balanced supply-demand situation in the future.”
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