Rare earth magnets, though low in cost, play a critical role in India’s automotive sector. These magnets could soon become a major supply-side risk if China’s export restrictions and shipment delays continue, according to a report by Crisil Ratings.
Crisil highlighted that even a disruption lasting more than a month can derail electric vehicle (EV) launches, impact production, and slow sectoral growth. Rare earth magnets are essential for permanent magnet synchronous motors (PMSMs), which power EVs and hybrids due to their high torque, energy efficiency, and compact size. In internal combustion engine (ICE) vehicles, their usage is mainly limited to electric power steering and other motorised systems.
In April 2025, China—the world’s largest exporter of rare earth magnets—imposed export restrictions on seven rare earth elements and finished magnets, requiring special export licences. The updated rules mandate detailed end-use declarations, including confirmation that these products will not be used in defence or re-exported to the US.
“With the clearance process taking at least 45 days, this added scrutiny has significantly delayed approvals. The growing backlog has further slowed clearances, tightening global supply chains,” Crisil noted.
India, which imported over 80 per cent of its 540-tonne magnet requirement from China last fiscal year, is already feeling the pinch. Crisil said, “By end-May 2025, nearly 30 import requests from Indian companies were endorsed by the Indian government, but none have yet been approved by Chinese authorities, and no shipments have arrived.”
Anuj Sethi, Senior Director at Crisil Ratings, stated, “The supply squeeze comes just as the auto sector is preparing for aggressive EV rollouts. Over a dozen new electric models are planned for launch, most built on PMSM platforms. While most automakers currently have 4-6 weeks of inventory, prolonged delays could start affecting vehicle production, with EV models facing deferrals or rescheduling from July 2025. A broader impact on two-wheelers (2W) and ICE passenger vehicles may follow if the bottlenecks persist.”
For fiscal 2025-26, India’s domestic passenger vehicle volumes are expected to grow 2-4 per cent, while electric passenger vehicles could rise 35-40 per cent on a low base. Electric two-wheelers could see a 27 per cent rise, outpacing overall two-wheeler growth of 8-10 per cent. However, Crisil warned that sustained supply tightness could dent this growth momentum, especially in the EV space.
Recognising this risk, both the government and automakers are working on short- and long-term solutions. In the near term, companies are focusing on building strategic inventories, finding alternate suppliers, and increasing local assembly under the Production Linked Incentive (PLI) schemes. Long-term strategies include reducing import dependency by fast-tracking domestic exploration, setting up local rare earth processing units, and investing in recycling infrastructure.
India’s Ministry of External Affairs has also taken note. Spokesperson Randhir Jaiswal confirmed, “We are in touch with the Chinese side, both here in Delhi and in Beijing, to bring predictability in the supply chain for trade, consistent with international practices.”
Commerce and Industry Minister Piyush Goyal recently called China’s export restrictions a global “wake-up call.” He emphasised that India is actively working to build alternative supply chains and positioning itself as a reliable partner for international businesses looking to diversify away from China.
Speaking from Switzerland during an official visit, Goyal acknowledged that China’s curbs will pose short-term challenges for India’s automotive and white goods sectors. China’s dominance in rare earth processing—accounting for over 90 per cent of global magnet production—has exposed global supply vulnerabilities across critical sectors, including automobiles, clean energy, and home appliances.
Meanwhile, India and Central Asian countries—Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan—have shown interest in joint exploration of rare earth and critical minerals. This potential collaboration was discussed during the recent India-Central Asia Dialogue in New Delhi.
(From ANI)
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