The government is engaged in both diplomatic and commercial discussions with China on supply restrictions on rare earth material, according to government sources. While the ministry of external affairs (MEA) and Ministry of commerce are in talks with their counterparts in China, the government is also facilitating the auto industry’s talks with the Chinese suppliers, said a commerce ministry official.
“These are export controls, which China has invoked for the whole world. They have brought a regime where perhaps licenses will be required. So, we are facilitating our importers and our automobile makers in whatever way possible,” said the official, adding that these diplomatic and commercial communications should give a positive outcome.
Though, he refused to give a timeline for finding a solution to the problem.
The Indian automotive sector, particularly the electric vehicle (EV) segment, is grappling with a supply-chain disruption due to China's stringent export restrictions on rare earth magnets. These low-cost yet critical components are indispensable for modern vehicles, and their scarcity threatens to impact production, new model launches, and the industry's ambitious growth trajectory.
India, which sourced over 80% of its approximately 540 tonne of magnet imports from China last fiscal year, has begun to feel the pinch. By the end of May 2025, despite nearly 30 import requests from Indian companies being endorsed by the Indian government, none had received approval from Chinese authorities, and no shipments had arrived. Over 90% of rare earth magnet processing is concentrated in China, leaving limited short-term alternatives for the auto industry.
The government has earlier said that it is looking for alternative suppliers for rare earth minerals. According to an estimate, 65% of India's 2,270 tonne rare earth mineral imports in FY24 came from China.
Rare earth magnets are made from alloys of rare earth elements. They are integral to Permanent Magnet Synchronous Motors (PMSMs), which are widely used in EVs for their high torque, energy efficiency, and compact size. Hybrid vehicles also rely on them for efficient propulsion. In Internal Combustion Engine (ICE) vehicles, their use is primarily limited to electric power steering and other motorized systems.
China is the world's dominant exporter of rare earth magnets, controlling over 70% of global Rare Earth Element (REE) production and over 90% of refining capacity.