China's export curbs on rare earth magnets threaten India's EV momentum: Crisil

Time of India

10-06-2025

India's automotive sector is staring at a critical supply-chain risk as rare earth magnet shipments from China remain stalled under the latter's tightened export norms, stated Crisil Ratings. Though low in cost, these magnets are indispensable to the functioning of electric vehicles (EVs), particularly those using permanent magnet synchronous motors (PMSMs), known for their high torque and energy efficiency.
If China's export restrictions persist beyond a month, industry stakeholders warn of potential delays in EV model launches, disruptions in production, and a broader impact on growth momentum across the passenger vehicle (PV) and two-wheeler (2W) segments,the report noted.
China Tightens Control: Clearances Drag Amid New Export Licensing Norms
In April 2025, China—accounting for over 90 per cent of global rare earth magnet processing—mandated export licences for seven rare earth elements and finished magnets. The new framework requires detailed end-use disclosures and customer declarations, including confirmation that these materials won't be used in defence or re-exported to the US.
The clearance process now takes a minimum of 45 days, and delays are piling up. Though India approved nearly 30 import requests from domestic companies by end-May, none have received Chinese approvals yet, leaving shipments in limbo.
EVs Most at Risk, But Impact Could Spread to ICE Segment
Rare earth magnets are core to PMSMs used in EVs and hybrids. While internal combustion engine (ICE) vehicles use them more sparingly—primarily in electric power steering—supply shortages could eventually affect ICE production too.
'Most OEMs currently have 4-6 weeks of inventory. If the situation continues beyond June, we could see EV launches pushed to later quarters,' said Anuj Sethi, Senior Director, Crisil Ratings. He cautioned that while the initial impact would be on EVs, a prolonged disruption could extend to 2Ws and ICE PVs.
EV Growth Projections at Risk Amid Fragile Supply Chain
India's auto industry is poised for strong growth in electric mobility in FY26. Electric PV volumes are projected to grow 35–40 per cent year-on-year, albeit on a low base, while electric 2Ws may grow ~27 per cent, well ahead of overall 2W growth at 8–10 per cent.
However, these projections now appear vulnerable. 'The shortage of rare earth magnets is forcing automakers to reassess supply-chain strategies,' said Poonam Upadhyay, Director, Crisil Ratings. 'Despite contributing less than 5% of vehicle cost, these components are critical and irreplaceable for key systems.'
Automakers Scramble to Diversify and Build Buffers
To mitigate the crisis, OEMs are actively engaging with alternative suppliers in Vietnam, Indonesia, Japan, Australia, and the US. Companies are also trying to optimise existing inventories and in some cases, divert magnets towards ICE production—which require fewer units—further limiting availability for EVs.
Industry experts note that, unlike semiconductors, rare earth magnet supplies remained relatively stable during the pandemic, reinforcing the just-in-time inventory approach. But the current bottleneck has exposed the fragility of this strategy.
Government & Industry Move to Secure Supply
The report notes that India is taking both short- and long-term steps to secure magnet availability. In the near term, the focus is on:
-Building strategic stockpiles
-Expanding sourcing from non-China regions
-Boosting domestic assembly of magnet components under PLI schemes
For the long haul, efforts are being made to fast-track rare earth mineral exploration, develop local processing capacity, and invest in recycling ecosystems to reduce dependence on imports.
While the diversification push gains momentum, the pace of China's export approvals will remain the most immediate variable. However, the report cautions that any further delay could intensify disruptions in the automotive value chain, making these low-cost magnets a high-stakes factor for India's vehicle manufacturing sector.>