Rare earth magnet supplies may decline by mid-July

India’s auto sector faces a threat from rare earth magnet shortages, as inventories are expected to run out by mid-July 2025 amid China’s export restrictions, reveals a recent report by ICRA. With 85% of imports sourced from China, the crisis exposes strategic vulnerabilities.

According to rating agency ICRA, the Indian and global automotive industries may encounter major disruptions, with inventories of rare earth magnets expected to be depleted by mid-July 2025 for specific applications. The shortage stems from China’s export restrictions and subsequent shipment delays, posing a serious threat to production continuity and market stability.

The automotive sector, which had just recovered from the semiconductor shortage of 2021–22 that reduced passenger vehicle production by nearly 100,000 units (approximately 4%), is now facing another supply chain disruption. 

Neodymium-iron-boron (NdFeB) magnets, known for their high strength and efficiency, are crucial to several high-performance automotive applications. They are widely used in traction motors for electric two-wheelers and passenger vehicles, as well as in power steering motors found in both electric and internal combustion engine vehicles.

In contrast, ferrite magnets—used in less demanding applications such as wiper motors, window regulators, and starter motors—are not affected by the same level of supply risk.

In an effort to mitigate the impact of rare earth magnet shortages, Indian auto component manufacturers and OEMs are actively considering a range of alternatives. These include importing fully assembled electric motors from China, outsourcing rotor magnet assembly to China and re-importing the finished components, exploring alternative materials with comparable magnetic performance that are not classified as rare earths, and shifting toward magnet-free motor technologies that rely on electromagnets or other inductive systems. 

However, each of these solutions involves substantial logistical, regulatory, and engineering complexities. To prevent disruptions—particularly with magnet inventories expected to be exhausted by mid-July 2025—industry players will need to significantly accelerate their development, testing, and validation processes. 

ICRA emphasized that unless these challenges are swiftly addressed, the ongoing supply disruption could significantly impact production planning and the momentum of India’s EV transition.

ICRA Senior Vice President and Group Head – Corporate Ratings, Jitin Makkar noted that the Electric two-wheeler motors in India typically cost between Rs 8,000 and Rs 15,000, depending on their power and vehicle specifications. Notably, rare earth magnets contribute to nearly 30% of the total motor cost. In FY2025, India imported about US$ 200 million worth of these magnets for both automotive and non-automotive uses, with around 85% sourced from China. Though the trade value may seem relatively small, the strategic reliance it represents is significant. This supply uncertainty has created serious challenges for production planning. He warned that continued dependence on China for these critical materials could severely impact the automobile industry, especially the rapidly growing electric vehicle segment, if not promptly addressed.

Industry experts believe that India’s rare earth element (REE) crisis is more than just a supply chain hiccup—it’s a strategic alarm. China’s restrictive export licensing has created a major bottleneck, revealing the vulnerability of India’s electric vehicle (EV) ambitions as inventories shrink and approvals remain delayed. This situation highlights the risks of relying heavily on a single geopolitical source for vital materials. To build long-term resilience, India must develop a comprehensive domestic REE ecosystem. Establishing strategic reserves, fostering public-private R&D collaborations, and strengthening global partnerships should all form part of an integrated national strategy.