China’s restrictions on rare earth magnets could crimp Indian EV rollout

China has started asking for end-user certificates to clear exports of these magnets, which are required in electric motors and some components used in EVs, a development first reported by CNBC-TV18.

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As per a person aware of the development, the certificate needs to be signed by a director of the importing company that discloses end-use of the magnets along with pictures of the product where they will be used.

To be sure, the restrictions on exports are not specific to India and came into effect on 4 April, post the announcement of tariff hikes by the US. As per industry estimates, China controls about 90% of rare earth magnet production.

As per industry insiders and experts, this can turn a major into worry for EV makers who source motors locally or produce them on their own. As a result of such restrictions, the production of electric vehicles can slow down which will lead to longer waiting times for vehicles and slower sales.

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“The industry is evaluating the dependence on rare earth material from China to be not caught off guard. These materials are critical in production of electric vehicles or electric motors so any disruption will be an issue,” Gaurav Vangaal, associate director-light vehicle production forecasting-Indian Subcontinent at S&P Global, said.

As per official data, imports of rare earth metals grew by 22% from 1,848 tonnes in FY20 to 2,270 tonnes in FY24.

Auto component makers importing the magnets from China said the country has stopped exporting rare earth magnet altogether. They expect the situation to improve in the coming 30-45 days.

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One maker of electric motors said he is sending the rotor to China and has asked his supplier to assemble the magnets in it and send it back as a temporary workaround.

“The entire supply chain is reliant on China. They control the global rare earth magnet market. We have submitted the documentation to the Chinese embassy through the ministry of heavy industries,” said Shiva Kumar H, co-founder of Mecwin Green Propulsions Pvt. Ltd, a manufacturer of traction motors for electric vehicles.

According to a person aware of the development, the Society of Indian Automobile Manufacturers held a meeting on Thursday to assess the impact of the Chinese restrictions.

“The auto industry works on just-in-time. It’s not like we pile up inventories. So this can become a very big problem very quickly,” an industry executive aware of the developments said.

To be sure, the requirement for certification will only be a problem if motors are produced locally.

“Not everyone is producing motors on their own which require the rare earth magnets. The industry is still assessing the exact impact of the move as it’s still not clear how much we produce on our own,” a person aware of the discussions said.

The hurdle in production comes after the overall EV market nearly touched the 2 million-mark in 2024. Moreover, the surge in clean fuel vehicles so far is largely being led by the two- wheeler market which recorded 1.14 million sales in 2024.

Moreover, country’s major carmakers are ramping up production of electric vehicles as new launches hit the market. Mahindra and Mahindra, Hyundai Motor India and Maruti Suzuki all have plans to expand their presence in the electric car market which has largely been led by Tata Motors so far.

Queries sent to auto makers on Friday evening did not elicit an immediate response.

Any impact on the speed of production of vehicles can hurt the overall growth in sales as companies will find it hard to manufacture and dispatch units on time.