China's rare earth export curbs hit auto industry

Korea Herald

05-06-2025

BERLIN/FRANKFURT, Germany (Reuters) — Some European auto parts plants have suspended output and Mercedes-Benz is considering ways to protect against shortages of rare earths, as concerns about the damage from China's restrictions on critical mineral exports deepen across the globe.
China's decision in April to suspend exports of a wide range of rare earths and related magnets has upended the supply chains central to automakers, aerospace manufacturers, semiconductor companies and military contractors around the world.
China's dominance of the critical mineral industry, key to the green energy transition, is increasingly viewed as a key point of leverage for Beijing in its trade war with US President Donald Trump. China produces around 90 percent of the world's rare earths, and auto industry representatives have warned of increasing threats to production due to their dependency on it for those parts.
"It just puts stress on a system that's highly organized with parts being ordered many weeks in advance," said Sherry House, Ford's finance chief, at an investor conference Wednesday.
She said China's export controls add administrative layers that are sometimes smooth, and sometimes not. "We're managing it. It continues to be an issue, and we continue to work the issues."
EU Trade Commissioner Maros Sefcovic said Wednesday that he and his Chinese counterpart had agreed to clarify the rare earth situation as quickly as possible.
"We must reduce our dependencies on all countries, particularly on a number of countries like China, on which we are more than 100 percent dependent," said EU Commissioner for Industrial Strategy Stephane Sejourne.
"The export (curbs) increase our will to diversify," he said as Brussels identified 13 new projects outside the bloc aimed at increasing supplies of metals and minerals essential.
Europe's auto supplier association CLEPA said several production lines have shut down after running out of supplies, the latest to warn about the growing threat to manufacturing due to the controls.
Of the hundreds of requests for export licenses made by auto suppliers since early April, only a quarter have been granted so far, CLEPA added, with some requests rejected on what the association described as "highly procedural grounds."
It did not identify the companies but warned of further outages.
While China's announcement in April coincided with a broader package of retaliation against Washington's tariffs, the measures apply globally and are causing worry among business executives around the world.
Earlier Wednesday, Mercedes-Benz production chief Joerg Burzer said he was talking to top suppliers about building "buffers" such as stockpiles to protect against potential threats to supply. Mercedes was currently not affected by the shortage.
BMW said that part of its supplier network was disrupted, but its own plants were running as normal.
German and US automakers have complained that the restrictions imposed by China threaten production, following a similar grievance from an Indian EV maker last week.
Mathias Miedreich, board member for electrified propulsion at German automotive supplier ZF Friedrichshafen, said the company has largely been able to get needed permits from China.
In a media briefing Tuesday, he said he worries though that the situation eventually could resemble the computer-chip shortage during the COVID-19 pandemic, which wiped out millions of vehicles from automakers' production plans.
Many are lobbying their governments to find a quick solution but some companies only have enough supplies to last a few weeks or months, Wolfgang Weber, CEO of Germany's electrical and digital industry association ZVEI, said in an emailed statement.
Swedish Autoliv, the world's biggest maker of air bags and seat belts, said its operations are not affected, but CEO Mikael Bratt said he has set up a task force to manage the situation.
There are few alternatives to China.
Automakers from General Motors to BMW and major suppliers like ZF and BorgWarner are researching or have developed motors with low- to zero rare earth content in a bid to cut their reliance on China, but few have managed to scale production to bring down costs.
BMW has deployed a magnet-free electric motor for its latest generation of electric cars, but still requires rare earths for smaller motors powering components like windshield wipers or car window rollers.
"There is no solution for the next three years except to come to an agreement with China," said Andreas Kroll, managing director of Noble Elements, a rare earths importer for medium-sized companies and startups without their own inventories.
"China controls practically 99.8 percent of global production of heavy rare earths. Other countries can only produce these in minimal quantities, virtually on a laboratory scale."