India’s electric vehicle (EV) ambitions face a major setback following China’s April 2025 decision to tighten export restrictions on rare earth magnets which is a critical components used in EV motors. Though these magnets account for less than 5% of a vehicle’s cost, their scarcity could bring manufacturing to a standstill.
What’s Happening?
- New Beijing licensing requirements: China now mandates licenses, detailed end-use disclosures, and military non-use guarantees for seven rare earth magnets and alloys, including samarium, terbium, dysprosium, neodymium, extending approval times to at least 45 days.
- Crippling delays: By May 2025, India had cleared roughly 30 import requests at home but none approved by China, leaving automakers empty-handed.
Maruti Suzuki has decided to cut its production estimate for e-Vitara by almost two-thirds for the first half of FY26.
Ripple Effect on Indian EV Industry
- Production bottlenecks: Vehicle rollouts, including dozens of new EVs, and major two-wheeler launches could be delayed by July 2025 due to low magnet inventory.
- OEM impact: Maruti Suzuki has already slashed its e‑Vitara six-month production target by two-thirds (from approx. 26,500 to approx. 8,200 units) attributable directly to magnet shortages.
- Potential price increases: Analysts predict a 5–8% cost bump for EVs and scooters as shortages tighten pricing dynamics.
Strategic Implications & Response
- Risk of supply chain vulnerability: India’s reliance on China has climbed; over 80–90% of its 540 tons of magnet imports came from China last fiscal year.
Government interventions:
- Offering production-linked incentives to domestic rare-earth magnet manufacturers.
- Amending mining regulation (MMDR Act) to unlock critical mineral exploration.
- Planning stockpiling of strategic materials and promoting recycling initiatives.
- Conducting diplomatic outreach to expedite Chinese export approvals.
Broader Industry Risks
- Automotive ecosystem at risk: Shortages could ripple into ICE vehicles, locking up components like power steering and starters.
- Strategy to diversify: OEMs are scouting alternative magnet suppliers in Vietnam, Indonesia, Japan, Australia, and the U.S..
- Domestic capacity challenge: Although India holds approx. 6.9 Mt of rare-earth reserves, processing infrastructure remains limited. Scaling up will take years.
What It Means for India’s EV Roadmap
- Short-term delays: Expect production slowdowns and launch postponements from July to September 2025 if magnet imports remain blocked.
- Moderate price inflation: Increased costs will likely be passed down, affecting consumer buying patterns.
- Policy acceleration: The crisis is expected to expedite "Atmanirbhar Bharat" strategies for critical minerals and processing capabilities.
