Rare Earth Crisis: China’s Blockade Looms Over India’s Auto Industry

Business News: India's automobile industry is facing an invisible crisis these days. Neither the engine has failed nor has there been any technical glitch, but the production of vehicles in the factories may soon come to a halt. The reason is China's new brake on the supply of rare earth magnets.

From April 2025, China has imposed strict controls on the export of rare earth magnets. Its effect has now reached India. If sources related to the auto industry are to be believed, if this situation remains, then by the beginning of June, the stock of many auto companies will be exhausted, and the assembly lines will have to be slowed down or closed.

What are these magnets without which the car is not made?

The component that has shaken the entire industry is neodymium-iron-boron (NdFeB) magnets. These are extremely powerful magnets, which are used in the motors, brakes, steering systems, wipers, speakers, and even battery units of EV vehicles. Without these magnets, the machines may be running in the factories, but the vehicles will not be completed.

Why did China become a problem?

China is the world's largest processor of rare earth magnets — it accounts for more than 90% of production and processing. In April, it implemented new rules for exports, which included procedures such as

• Government license requirement
• End-use Certificate

before every shipment. This paperwork is so slow that many consignments sent to India are still stuck at Chinese ports.

India's concern increased, diplomatic efforts intensified

Teams from SIAM (Society of Indian Automobile Manufacturers) and ACMA (Automotive Component Manufacturers Association) are going to leave for China soon so that the export process can be expedited by meeting the officials there.

Along with this, India's Ministry of External Affairs and Ministry of Commerce are also communicating with China at the diplomatic level so that the situation can be handled before it worsens.

What are the options for India?

The truth is that India has no viable options right now. In 2023-24, India imported about 460 tons of rare earth magnets and planned 700 tons for 2025 — almost all of which was to come from China. India is making plans for domestic production, but they are still in the early stages.

Magnet shortage is weighing on the system

This crisis is not just a disruption in the supply of a component but also exposes a weakness in India’s production system — overdependence. Today, a small magnet has the power to halt the entire auto industry. If a solution is not found soon, vehicle assembly is bound to come to a halt before June.