Impact of China's Rare Earth Export Restrictions on India's Auto Industry

India's auto industry faces significant challenges due to China's restrictions on the export of critical rare earth magnets. Despite having import applications approved by China's embassy, supplies remain halted as approval from China's commerce ministry is pending.

Importance of Rare Earth Magnets

• Essential for the production of electric vehicles and components like gear systems and drive trains.
• Disruptions in supply could severely impact automobile production.

Current Situation

• India has not received rare earth magnet imports for two months, raising concerns about inventory depletion and production disruption.
• The Society of Indian Automobile Manufacturers (SIAM) has warned of potential production halts if the issue persists.
• In FY25, India imported 870 tonnes of rare earth magnets valued at ₹306 crore.

Broader Impact

• The restrictions affect not only the auto industry but also sectors like aerospace, clean energy, and electronics.
• Other countries, including the US, Germany, and Japan, are similarly impacted.

China's Export Controls

• China accounts for about 70% of global rare earth metals mining and nearly 90% of production.
• Export controls, announced on April 4, cover rare earth elements such as samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium.
• The controls were in response to US tariffs as part of safeguarding national security.

Diplomatic Efforts and Challenges

• Indian authorities are attempting to engage diplomatically with Beijing to resolve the supply issue.
• Of the 17 Indian auto component manufacturers, nine have had their end-user certificates endorsed by the Chinese embassy.
• Applications from eight other manufacturers are still pending.