The automotive industry is facing unprecedented supply chain disruptions due to China’s tightened export controls on rare earth magnets, essential for electric vehicle (EV) motors and hybrid systems.
Implemented in April and May 2025, these restrictions have led to production halts and forced automakers worldwide to scramble for alternatives.
In India, the Federation of Automobile Dealers Associations (FADA) warned that plant closures could begin by late June if shortages persist, threatening the livelihoods of thousands of workers.
Rare earths, such as neodymium and dysprosium, are critical for manufacturing high-performance magnets used in EV powertrains. With China controlling over 90% of global supply, its export curbs have sent shockwaves through the industry.
Maruti Suzuki, India’s largest carmaker, has slashed production targets for its e-Vitara EV by two-thirds, impacting its parent company, Suzuki Motor, which relies on India as a global EV production hub. Similar challenges are felt in Europe and Japan, where automakers are struggling to secure stable supplies.
In response, companies are diversifying their supply chains. Volkswagen’s recent 9.9% stake in a Canadian lithium mining firm reflects a broader trend of vertical integration, as automakers seek to reduce reliance on Chinese materials.
However, developing new sources is a long-term endeavor, and short-term production bottlenecks remain a concern.
The volatility in metal prices, compounded by U.S. tariffs on steel and aluminum, further complicates cost management. Industry experts emphasize the need for innovation in recycling rare earths and developing alternative magnet technologies to ensure long-term stability.
For now, the automotive sector braces for continued uncertainty as it navigates this critical supply chain crisis.
