New Delhi, June 12 The inventories of rare earth magnets may taper off by mid-July 2025 for certain automotive applications, following China imposing export restrictions and delaying clearance of shipments, according to an ICRA report released on Thursday.
While the automobile industry is exploring a range of contingency options, each of these appears ridden with logistical, regulatory, and engineering complexities, exacerbating the prevailing uncertainty, the report states.
Jitin Makkar, Senior Vice President at ICRA, said: "The industry, having recovered from the semiconductor supply crunch of 2021–22 that shaved off nearly 100,000 units - or about 4 per cent - from passenger vehicle production, now faces a fresh disruption. With China tightening export controls and delaying shipment clearances, rare earth magnet inventories are projected to last only until mid-July 2025 for several, if not all, passenger vehicle and two-wheeler applications.”
The magnets in question—neodymium-iron-boron (NdFeB)—are prized for their strength and efficiency. They are reserved for high-performance automotive applications such as traction motors in electric vehicles (two-wheelers and passenger vehicles) and power steering motors (in passenger vehicles) in both electric vehicles and internal combustion engine vehicles.
In FY2025, India imported around $200 million worth of these magnets for both automotive and non-automotive applications, with approximately 85 per cent of this sourced from China.
"While the trade value may appear modest, the strategic dependence it reflects is anything but. The supply uncertainty has cast a shadow on production planning. The dependence on China for these specialised materials could upend the automobile sector, particularly the fast-growing electric vehicle segment, if the concern remains unresolved”, Makkar added.
The report further states that to mitigate the risk, Indian auto component manufacturers/Original Equipment Manufacturers (OEMs) are exploring a range of options. These include importing fully assembled motors from China, shipping the rotors, on which the rare earth magnets are mounted, to China for magnet assembly and then re-importing the assembled rotors. They are also substituting rare earth magnets with alternatively engineered materials aimed at achieving similar magnetic performance as rare earths without crossing the threshold that would classify them as rare earth magnets. These workarounds, however, come with logistical, regulatory, and engineering complexities.
Implementing some of these alternatives would also involve accelerating the development, testing, and validation cycles to minimise production disruptions.
The stakes are high. As Indian manufacturers push towards securing a stable supply chain, the challenge with critical components like rare earth magnets is their concentrated sourcing destination. The current crisis, while disruptive, may also serve as a catalyst for innovation and strategic diversification - both in sourcing and in science, the report added.
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