India’s automobile industry is dealing with increasing uncertainty and possible production disruptions, especially for electric vehicles (EVs), as a result of China’s recent export restrictions on rare earth elements and finished magnets.
China, which processes more than 90% of the world’s rare earth magnets, has been requiring special export licenses and extensive end-use disclosures for seven rare earth elements and the magnets they are associated with since April 2025. This move has already started to put pressure on supply chains that are vital to India’s auto industry.
Although a group of 40–50 senior executives from Indian automakers and component suppliers has been granted visas and is getting ready to travel to China, they are still awaiting approval from the Chinese Ministry of Commerce to have talks on accelerating the import of magnets. Despite the urgency, no meeting approvals have been given thus far, and as of June 2025, no cargo had arrived and over 30 import requests that the Indian government had accepted had not been approved by Chinese authorities.
The effect is already apparent: the nation’s biggest automaker, Maruti Suzuki India, has lowered its production target for the new e-VITARA model, intending to produce only 8,000 units by September, significantly less than its initial objective of 26,000 units for the same time frame. The immediate risk to EV production is evident, but the business hopes to make up the difference later in the fiscal year, with a target of 67,000 vehicles.
For permanent magnet synchronous motors (PMSMs) used in EVs and hybrids, rare earth magnets—especially those containing samarium, gadolinium, terbium, dysprosium, and lutetium—are essential because they provide high torque, energy efficiency, and small size. Although electric power steering and auxiliary systems are the primary uses of these magnets in internal combustion engine (ICE) vehicles, if delays continue, the scarcity might have an impact on the whole automobile industry.
Crisil Ratings has cautioned that if China’s export curbs and shipment delays persist, rare earth magnets—despite their low cost—could represent a significant supply-side concern for India’s automobile industry. Although automakers now have four to six weeks’ worth of inventories, prolonged bottlenecks may cause manufacturing to halt as early as July 2025, particularly for EV vehicles. Long-term shortages may potentially impact ICE passenger cars and two-wheelers.
Comprehensive end-use and client certifications, including guarantees that the magnets won’t be utilized in defense or reexported to the US, are now required by China’s updated export regulations. The clearance process now takes at least 45 days because to the increased inspection, which has tightened international supply chains and increased the backlog.
India, which imported more than 80% of its 540 tonnes of rare earth magnets from China during the most recent fiscal year, is currently looking into indigenous production options and urgently requesting government involvement to speed up Chinese licenses. However, there is still a good chance that India’s automobile industry would see a major downturn until the present obstacle is removed.
