June 11, 2025 —As global supply chains reel from China's tightening grip on rare earth exports, India's automotive and electric vehicle (EV) sectors are facing a stark reality: their future hinges on securing access to these critical materials. With China holding a near-monopoly on rare earth refining and production, recent export restrictions have sent ripples through India’s car manufacturing ecosystem, forcing both the public and private sectors to urgently reassess strategies.
China Signals Openness — But the Catch Remains
At least ten Indian auto component manufacturers have moved a step closer to securing licenses to import rare earth materials from China, following favorable endorsements from the Chinese Embassy. This comes as part of a complex approval process by China’s Ministry of Commerce, which now includes a stringent end-use certification aimed at non-military applications. India's own embassy in Beijing is also working to facilitate the process, underlining the strategic importance of these materials.
However, no licenses have yet been granted. The process, triggered by China’s April 2025 policy change in response to U.S. tariffs, involves an arduous 45-day certification period. This delay has already begun to impact production across several major markets, including India, Japan, and parts of Europe.
How Rare Earths Power Modern Mobility
Rare earth magnets — primarily composed of neodymium, praseodymium, and other lanthanides — are vital to the functioning of modern vehicles. In internal combustion engine (ICE) cars, they drive motors in power steering systems, sensors, wipers, and infotainment units. For EVs, their role is even more critical, embedded in Permanent Magnet Synchronous Motors (PMSMs) that enable high torque, efficiency, and compactness.
“You can't build a modern car without rare earths,” says Arun Malhotra, former MD of Nissan Motor India. And therein lies the challenge: while India has the world’s fifth-largest reserves of rare earths (6.9 million tonnes), it lacks a domestic refining ecosystem. Currently, only IREL (India) Ltd., a public sector unit, handles minimal production — with none of the output supporting auto applications.
Industry Response: Ramp Up While Stocks Last
To mitigate short-term risks, Indian automakers have been ramping up production to maximize use of current rare earth inventories. Dealerships are reportedly increasing stock levels to buffer against potential supply shocks by mid-July.
- Toyota Kirloskar, Tata Motors, and Mahindra & Mahindra have signaled minimal impact so far.
- Hyundai Motor India’s Korean parent has rare earth reserves sufficient for up to a year.
- However, Maruti Suzuki, India’s largest carmaker, appears more vulnerable. The company has reportedly cut production targets for its debut EV — the e-Vitara — by two-thirds due to material shortages.
Long-Term Solutions: Policy, Investment & Recycling
The Indian government is currently working on a rare earth policy modeled on its Production Linked Incentive (PLI) schemes. While this is a welcome move, building a robust domestic supply chain — from mining to magnet manufacturing — could take up to a decade. Establishing a single rare earth processing plant can cost between ₹4,000 and ₹8,000 crore.
Experts like Nitin Gupta, CEO of Attero Recycling, suggest that India should urgently scale up its recycling infrastructure as a faster alternative. “We’re already extracting over 97% pure battery-grade cobalt, lithium, and nickel,” Gupta says. “Recycling rare earths from end-of-life products could theoretically meet 80–90% of domestic demand.”
In fact, Attero claims that India could emerge as a global recycling hub, processing materials not just from local sources but also imported waste. This circular approach could offer a near-term bridge while long-term mining and refining projects take shape.
Time to Rethink Tech Strategies?
Another interim measure being debated is promoting hybrid vehicles as a more resource-light alternative to EVs. While hybrids still use rare earth magnets, they consume significantly fewer resources and might better suit India’s cost-sensitive market.
Ravi Bhatia of JATO Dynamics believes a hybrid push could help the industry transition without overburdening the rare earth supply chain. However, others, including Gupta, warn that hybrids are only a short-term fix and still rely on rare earths. Alternatives like ferrite magnets or magnet-free systems, while discussed, offer poor performance and infeasible design compromises.
Global Coordination and Strategic Autonomy
In addition to domestic efforts, India is reportedly in talks with allies such as Australia and Japan to diversify its rare earth import base. Yet these alternatives come at a higher cost and lack the scale China offers — a reflection of the deep-rooted dependency the world has on Beijing's supply chains.
0 Comments