China’s recent export restrictions on rare earth magnets have sent shockwaves through the global auto industry, and India is feeling the heat. Starting April 2025, China—responsible for over 90% of the world’s rare earth magnet supply—now requires special export licences for seven rare earth elements and finished magnets. The new process takes at least 45–60 days, with no guarantee of approval, causing major supply chain delays.
Why does this matter?
Rare earth magnets, made mainly from neodymium or samarium, are essential for electric vehicles (EVs). Each EV uses 3–5 kg of these magnets, compared to just 100g in traditional cars. These magnets power the motors that drive EVs, as well as critical systems like automatic transmission and power steering. With inventories running low, Indian automakers are at risk of production slowdowns or even shutdowns if the supply crunch continues beyond a month.
Which Indian stocks could be affected?
- Tata Motors, Mahindra & Mahindra, Maruti Suzuki: Major EV and auto manufacturers reliant on rare earth magnets for motors and key components.
- Sona BLW Precision Forgings (Sona Comstar), Bosch Ltd, Motherson Sumi Systems: Auto component makers supplying EV and ICE parts that use rare earths.
- Bharat Electronics Ltd (BEL), Hindustan Aeronautics Ltd (HAL): Defense and aerospace firms using rare earths in advanced electronics and systems.
- Suzlon Energy, Inox Wind: Renewable energy companies using rare earth magnets in wind turbine generators.
- Dixon Technologies: Consumer electronics manufacturer with exposure to rare earth-dependent components.
Not just magnets—broader supply chain risks
Today it’s rare earth magnets, but tomorrow it could be lithium or cobalt—other EV-critical minerals where China also dominates global refining and processing. Tata Motors and JLR have already flagged these vulnerabilities in their latest annual reports, warning of possible production delays due to China’s stranglehold on the EV supply chain.
What’s being done?
The Indian government is exploring diplomatic channels and considering incentives for domestic rare earth magnet manufacturing, but experts warn this will take years to bear fruit. Until then, integrating hybrid tech, biofuels, CNG/LNG, and hydrogen is seen as a more resilient approach for the auto sector.
“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,” — Anuj Sethi, Senior Director, Crisil Ratings.
Bottom line
India’s over-dependence on Chinese rare earth magnets is a critical vulnerability. Until local supply chains are built, the country’s EV ambitions face a major roadblock. The current crisis is a stark reminder: a robust, diversified supply chain is as important as the technology itself.
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