Falling under a crucial stage, China's tightened export controls on rare earth magnets, a critical part of an EV motor, are thus becoming a barrier in the way of the burgeoning electric vehicle sector in India.
The Beijing regime controls more than 90% of global rare earth magnet processing and now has moved to jeopardize the auto sector's ambitious growth targets in India, potentially delaying production and raising prices for EVs.
Alarm bells began to ring in April 2025 when China imposed fresh export restrictions on seven rare earths and finished magnets. The new rules provide that detailed end-use declarations must be given and that re-exports associated with defense or destined for the US are banned outright.
The immediate impact on India has been a severe slowdown in the clearance process whereby import requests have been delayed for at least 45 days. In late May, almost 30 import applications by Indian companies were still awaiting approval from Chinese authorities, with no shipments having landed.
Rare earth magnets are cheap yet are absolutely central to Permanent Magnet Synchronous Motors (PMSMs) of EVs and hybrids. These motors demand high torque, energy efficiency, and small working size from their magnets.
While most Indian car manufacturers currently hold around 4-6 weeks' worth of inventory, industry experts warn that longer delays will hit production around July 2025 and could, therefore, affect the launch schedule of exciting new EV models. This kind of large-scale disruption will cascade into two-wheelers and possibly even ICE passenger vehicle supply if these bottlenecks continue.
This sets up what is going to be a glaring dependency for India because more than 80% of India's 540-ton magnet imports in the last fiscal year came from China. This dependency has thrown up a strategic weakness in India's EV supply chain while India is setting forth into aggressive EV rollouts, with over a dozen new electric models lined up for launch, most being on PMSM platforms.
The crisis has led to a multi-pronged approach for India. Short term, manufacturers are finding alternate suppliers and utilizing present inventories. There are also talks of easing localization rules for EV manufacture to allow import of either complete motors or parts, thereby sidestepping direct magnet import obstacles.
Such workarounds, however, pose their own logistical, regulatory, and engineering dilemmas and may also push costs upwards, which may hurt the affordability of EVs in a cost-conscious market such as India.
Indian efforts would focus on progressively reducing import dependence in the long run. This would mean expedited exploration for rare earths domestically and capacities for processing locally coupled with recycling infrastructure.
To resolve the present situation diplomatically, India decided to set up direct lines of communication with China so as to stabilize the supply flows and regain predictability. In another move, India is also trying to diversify its sources. It is gaining support from the Central Asian countries. These include Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan. They will collaborate on joint exploration of rare earths and critical minerals.
The present situation stands as an even starker reminder of critically important minerals for the self-reliance initiative, upon which the growth of emerging sectors depends.