"Connecting communities, empowering nations: Unifying the Regional and Global Economy ."

In 2025, as India races to position itself as a global hub for electric mobility, a strategic jolt has emerged from across the Himalayas. China’s recent export restrictions on rare earth materials, particularly finished magnets, have cast a long shadow over India’s fast-growing electric vehicle (EV) sector. With rare earths forming the unseen core of EV innovation, the unfolding supply chain disruption exposes a fundamental vulnerability in India’s green transition strategy.

China’s Rare Earth Grip: Current Status

In April 2025, China implemented strict export controls on seven key rare earth elements and finished magnet products. Exporters are now required to submit detailed declarations about end-use applications, with clearance timelines extending beyond 45 days. As of June, despite India approving 30 import requests, not a single shipment has cleared Chinese customs.

This bureaucratic bottleneck is particularly troubling for India, which relies on China for over 93% of its permanent magnet imports—amounting to 53,700 tonnes in FY25. Even though import volumes surged by 95% year-on-year, their overall value increased by just 12%, pointing to aggressive price reductions by China that undercut domestic substitution efforts.

How Rare Earth Shortage Impacts India’s EV Industry

1. An Immediate Supply Shock

Rare earth magnets—especially neodymium-iron-boron (NdFeB) magnets—are indispensable in the EV value chain. These components are central to high-efficiency motors, electric power steering systems, regenerative braking, and even wind turbines.

Most Indian automakers currently hold just 4–6 weeks of inventory. If export blocks persist beyond June 2025, companies may be forced to delay the launch of new EV models or cut production by July. Critical rollout plans involving over a dozen new models, many using permanent magnet synchronous motors (PMSMs), are already in jeopardy.

2. Broader Sectoral Repercussions

The impact isn’t limited to EVs. Hybrids and even internal combustion engine (ICE) vehicles rely on rare earth magnets for electronic features such as electric power steering. Production schedules across the board are being re-evaluated. Automakers like Maruti Suzuki are reportedly considering near-term production cuts due to uncertain supply timelines.

Structural Challenges for India

While India does have domestic reserves and limited refining capabilities for rare earth oxides, it lacks industrial capacity to convert these oxides into usable alloys and finished magnets. A proposed 500 TPA (tonnes per annum) plant in Hyderabad may offer some hope by late 2025, but it remains a modest start in the face of mounting demand.

China’s monopoly is stark—over 90% of the world’s rare earth magnet processing occurs there. This concentration makes short-term diversification nearly impossible, despite India’s efforts to establish alternative channels.


India’s Response: Navigating the Crisis

Short-Term Moves

Seeking Alternate Suppliers: Imports from Vietnam, Indonesia, Japan, Australia, and the U.S. are being explored. But switching costs, certification standards, and limited capacity make this a slow process.

Strategic Stockpiling: Automakers are working with the government to seek defense exemptions and accumulate critical inventory.

Long-Term Strategy

Build Domestic Supply Chains: Through PLI schemes and greater private participation, India is accelerating R&D in magnet manufacturing and recycling.

International Exploration: Joint rare earth exploration with Sri Lanka, Mongolia, and Central Asian nations is under negotiation. These partnerships may open new ore supply lines, but turning ores into market-ready magnets will require a complete industrial ecosystem.

Strategic and Economic Implications

Economic Fragility: Despite rare earth magnets forming less than 5% of total vehicle cost, their absence can halt entire production lines—highlighting a critical chokepoint in India’s industrial base.

Geopolitical Dependence: China’s use of rare earths as a trade weapon—timed with global tensions and trade wars—illustrates the geopolitical leverage of monopolizing critical minerals. It’s a wake-up call for India to reimagine its strategic supply dependencies.

The Rare Earth Reckoning

The EV industry in India stands at a critical juncture. While short-term contingency measures are cushioning the blow, the broader challenge lies in building resilient and self-sufficient supply chains. India’s green ambitions—be it in EVs, wind energy, or electronics—cannot hinge on a single geopolitical player.

China’s export restrictions are more than a trade issue; they are a strategic test of India’s readiness to scale advanced manufacturing and secure energy transition goals. As the world races toward net-zero, India must now race toward magnet independence.

#RareEarths
#EVIndustryIndia
#ChinaExportCurbs
#ElectricVehicles
#SupplyChainRisk
#GreenMobility
#GeopoliticalTrade
#StrategicMinerals
#IndiaEVTransition
#CriticalMineralsSecurity