Quick HighlightsIndia slashes import duties to 15% for EV makers committing $500M+ investment under the SPMEPCI scheme.China’s export restrictions on rare earth magnets trigger global concern; key impact on EV motor and ICE auto systems.Global supply chains disrupted, with India’s auto industry bracing for price hikes and production delays.Japan plans $100–400 million investment in India’s EV, battery manufacturing, and recycling to reduce dependency on China.When it comes to the automotive industry, Indian policy revolves around EV adoption by largely incentivizing a single platform (the battery electric vehicles or BEVs) at the cost of all other tech. With the launch of the Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI) , the Ministry of Heavy Industries has reduced import duty from 110% to 15% for all car manufacturers that will commit to manufacturing EVs in India. A mandated investment of USD 500 million (approx. ₹4,150 crores) is required, which has to be made within three years.China Restrictions on Rare Earth MetalsChina had imposed restrictions on the export of rare earth magnets and related materials back in April, which have set back a few manufacturers across the world. Car makers like Maruti Suzuki and two-wheeler manufacturers are facing shortage in materials and many are predicted to announce production cuts as well as price hikes .The current situation brings in the question of EV adoption, which reinforces dependency on China for rare earth magnets necessary for the EV batteries and other systems even in ICE (Internal Combustion Engine) models. This dependency could also come at the cost of India’s established local ICE auto value chain and ancillary ecosystem.Requirement of Rare Earth Magnets for EV and ICE VehiclesChina’s rare earth magnets particularly include neodymium-iron-boron (NdFeB) magnets which are crucial for EV manufacturing, especially the electric motors . With a strong magnetic field, they are needed for efficient and powerful electric motors, including traction motors in EVs .Rare earth is also required for making the permanent magnet synchronous motors (PMSM) which are used extensively in EVs. These magnets also play a crucial role in power steering, wiper motors, and braking systems which are essential in EVs and ICE vehicles alike.India’s EV30@2030 TargetThe current BEV policy push is focused on replacing ICE vehicles with BEVs powered by Lithium-ion (Li-ion) batteries which are the most viable energy storage option for the future right now. The government policy overtly favors BEVs, which are taxed at 5 percent as compared to other categories which are taxed at around 43-48 percent .The Centre has also been pushing its target of EV30@2030 which aims at a five year plan of ensuring that 30% of all newly registered private cars, 40% of all buses, 70% of commercial cars, and 80% of two-wheelers and three-wheelers will be electric .Rare Earth Shortage Causes Production Delays and Price HikesThe shortage of critical components will eventually cause a price hike and a possible production delay . While China has not put an outright ban on the export of rare earth magnets, the process has been made extremely difficult which could take up a long time and cause delays in deliveries. The applications for the acquisition of rare earth has to be routed through the Ministry of Commerce (DGFT) and the Ministry of External Affairs . There have even been cases of the Chinese suppliers asking for an end-use certification .While the availability of rare earth magnets is not limited to China, it is currently the most efficient at processing these critical elements . Japan has recently resumed its mineral processing industry but the US and India are heavily dependent on Chinese exports of these metals.Also Read: India Forms Panel to Tackle Rare Earth Shortage; China Tightens ExportJapan Eyes $100–400 Million Investment in India’s EV and Battery Ecosystem to Counter China’s Supply Chain DominanceJapan is preparing to invest significantly, between $100 million and $400 million (₹860–₹3,500 crore) , in India’s electric vehicle (EV), battery manufacturing, and recycling sectors, according to sources familiar with recent bilateral trade discussions.This move aligns with Tokyo’s broader strategy to diversify and de-risk global lithium-ion battery supply chains by reducing reliance on China, which currently dominates key segments such as critical mineral extraction, battery production, and rare earth magnet manufacturing. These components are vital for the global shift toward clean energy and electrified mobility .Strategic Collaboration for Supply Chain DiversificationJapanese trade envoys and investment agencies have been actively scouting Indian companies across various segments , including EV production, battery cell manufacturing, mineral processing, and recycling . Japanese private equity firms are also involved in evaluating opportunities, paving the way for potential joint ventures, technology-sharing agreements, and the setup of new processing units in India.These partnerships aim to position India as a crucial node in a more resilient and diversified Asian supply chain for critical clean-tech components .Also Read: India’s Electric Vehicle Future: 2025 EV Outlook and What It Means for the EV RevolutionQuad Raises Alarm on Supply Chain StabilityThe talks reflect growing concern among Quad member nations (India, Japan, the U.S., and Australia) over the vulnerability of key mineral supply chains . The alliance recently voiced its alarm over the "abrupt constriction and future reliability" of these critical inputs.During the bilateral meetings, one Japanese company expressed interest in collaborating on catalytic converter recycling , a niche that would enable access to precious metals like platinum and palladium which is essential for hydrogen fuel cell technologies in electric vehicles.High-Level Corporate and Government EngagementOver an intense 48-hour engagement, top officials from the Japanese government , private equity firms, leading battery and automobile manufacturers met with senior Indian counterparts , including representatives from India’s largest industrial conglomerates, EV companies, and recycling specialists.These meetings, held at the Japanese Embassy, brought together nearly 70 companies from both countries . Indian government officials and delegates from the International Advanced Research Centre for Powder Metallurgy and New Materials (ARCI) also participated.Also Read: EV Sales Reach 34% YoY Growth in Q2 2025 — TVS, Tata DominateMajor Players at the TableThe Indian delegation included marquee names such as Maruti Suzuki, Tata Group, and Honda , as well as key players in the battery and recycling industries like Attero and Lohum . Tata Capital and Vedanta also joined discussions. Japanese officials visited Lohum’s Uttar Pradesh facilities as part of their due diligence.On the Japanese side, representatives came from the Battery Association for Supply Chain (BASC) and major corporations such as Mitsubishi, Sumitomo, Daikin Chemical Southeast Asia, and Hanwa .Redefining Regional Manufacturing StrategyThis planned investment signals a major realignment in regional manufacturing and supply chain strategy. By strengthening ties with India, Japan aims to build alternative, more secure supply networks for clean energy technologies, essentially reducing its and the region's exposure to China-dominated supply routes.Also Read: India’s EV Start-up Funding Crosses $2 Billion in FY25: What’s Driving the Surge?