India’s push towards electric vehicles (EVs) and advanced automotive manufacturing is colliding with a stark reality: a heavy dependence on China for rare earth elements (REEs) – especially the neodymium, praseodymium, and dysprosium used in high-performance magnets. These rare earth magnets are the tiny backbone of EV motors, as well as many conventional car components like power windows and speakers. Yet China dominates this strategic supply chain, controlling over 90% of global capacity for processing rare earth magnets. In 2022, about 90% of India’s own REE imports (by volume) came from China. This near-monopoly has long been a vulnerability, but it turned critical when Beijing tightened its grip on exports.
China’s Export Controls Shake the Auto Sector
In April 2025, China imposed new export restrictions on seven rare earth materials and certain magnet products, citing national security concerns. Exporters now must obtain special licenses and provide detailed end-use certificates, a bureaucratic hurdle that has choked off supplies. In the first month of the curbs, China’s overseas shipments of permanent magnets plunged by 51% year-on-year. These curbs – widely seen as a geopolitical lever – sent shockwaves through global industries, especially automotive, where viable alternatives outside China are almost non-existent.
For India, the timing was perilous. Automakers and parts suppliers suddenly found their imports stuck at Chinese ports awaiting licenses. By late May, the Society of Indian Automobile Manufacturers (SIAM) warned the government that magnet inventories would run dry “by end-May,” bringing vehicle production “to a grinding halt” by early June. SIAM urgently pleaded for New Delhi’s intervention to get held-up magnet shipments released. This was no idle alarmism: industry documents and executives painted a scenario in which assembly lines across the world’s third-largest car market might shut down within days absent relief. One reason the impact is so severe is that even a tiny magnet – often a low-cost component – can hold up the manufacturing of an entire vehicle if it’s missing. In short, a few kilograms of neodymium-iron-boron could stall an automotive supply chain worth billions.
Manufacturing Disruptions and EV Delays
The Chinese magnet squeeze has already disrupted Indian automotive plans. A telling example is Maruti Suzuki’s electric vehicle rollout. Maruti, India’s largest carmaker, is on the cusp of launching its first EV (the “e-Vitara” SUV) – a centerpiece of its strategy as India aims for 30% of new car sales to be electric by 2030. But those plans hit a snag: Maruti has slashed production targets for the e-Vitara by two-thirds for the April–September 2025 period due to rare earth magnet shortages. An internal document reviewed by Reuters shows an output cut from an initial 26,500 units down to about 8,200, explicitly citing “supply constraints” in critical rare earth materials needed for magnets. Maruti insists it will try to make up lost ground later in the year to hit its full-year goal, but the setback is significant. It underscores how China’s export curbs – implemented just as Maruti was gearing up its EV program – rocked the automaker’s supply chain.
The stress is not limited to passenger car makers. Bajaj Auto, a leading two-wheeler and three-wheeler manufacturer, warned in June that if magnet supplies from China didn’t resume soon, its EV production could be “seriously” impacted by July. Bajaj’s executive director described a “dark cloud on the horizon,” as the company and many peers had only a few weeks’ worth of magnet inventory left. Similarly, major component suppliers have sounded the alarm. Bosch India, a key tier-1 parts maker, reported that rare earth bottlenecks were squeezing its own suppliers, who now must furnish extensive documentation to Chinese authorities for each shipment. In effect, firms like Bosch and Mahle need separate Chinese export licenses for each end-customer (be it Maruti, Bajaj, TVS Motor, etc.), adding delays and uncertainty. This granular licensing – down to individual purchase orders – has created a logistical nightmare for the industry.
Notably, even companies that initially downplayed the issue are feeling the pressure. Maruti’s leadership publicly stated in early June that rare earth issues had “no material impact” on its EV launch timeline, but behind the scenes the company had already revised its production plans dramatically. Meanwhile, other global automakers have not been spared: for instance, Suzuki (Maruti’s parent) had to suspend production of a popular gasoline model in Japan due to the magnet shortage, and Ford idled an SUV line in the U.S. for a week for the same reason. The message is clear – no magnets, no motors, and no vehicles.
Near-Total Import Dependence
These disruptions lay bare India’s near-total reliance on imports for magnet materials. In the last fiscal year (ending March 2024), India’s auto sector imported around 460 tons of rare earth magnets, mostly from China. This year, with EV production rising, the industry’s magnet import needs are projected at ~700 tons (valued around $30 million). And it’s not just the auto sector: across all industries, India imported an astonishing 53,748 metric tons of rare earth magnets in FY 2024–25. Virtually all of these came from foreign sources – mainly China – because India currently has no commercial-scale domestic production of NdFeB magnets. The country does possess rich rare earth ore reserves (an estimated 6.9 million tons, the fifth-largest in the world). However, it mines and refines only a tiny fraction of this potential – around 2,900 tons of rare earth oxides per year, or <1% of global output. Practically none of that meager output finds its way into locally made automotive magnets for want of processing and manufacturing capacity. In fact, until now, India even exported a portion of its raw rare earths (like unprocessed neodymium) to countries like Japan for lack of domestic value-add facilities. This import dependence means India is acutely exposed to external supply shocks. As one industry report noted, China’s ability to “flood the market” with low-priced magnets over the years undercut any nascent Indian producers, leaving the country with no indigenous magnet industry to fall back on.
Short-Term Responses: Firefighting the Crisis
Confronted with an immediate supply crunch, Indian authorities and industry players have taken emergency measures. Diplomatic outreach to Beijing has been priority number one. In early June, New Delhi began organizing a delegation of auto industry executives to travel to China and plead for faster export license approvals. Indian diplomats joined counterparts from Japan and the EU in pressing China’s Ministry of Commerce to expedite magnet shipments, as many factories had only days of inventory left. “The short-term solution has to be to get Chinese authorities to clear things,” one Indian auto executive stressed, noting that a radical supply chain shift cannot happen overnight. By end-May, the Indian government had fast-tracked about 30 end-use certificates for magnet imports and was endorsing import license applications “within hours” on the Indian side. Yet as of early June, not a single Indian automaker or supplier had received the green light from Beijing to actually receive their pending orders. This bureaucratic limbo left an estimated 21 Indian firms (up from 11 in May) awaiting magnet import licenses, essentially paralyzing inbound supply.
India also opened backchannel talks: senior Indian government officials initiated “secretary level” discussions with China to defuse the crisis. Given the broader geopolitical strains between the two nations (from border disputes to investment restrictions), these conversations are delicate. Beijing has maintained that its export controls are lawful measures for national security and is “actively facilitating compliant trade”, but on the ground the trickle of approvals has been excruciatingly slow. Some analysts speculate that China’s hard stance toward India – in contrast to somewhat quicker licensing for Japanese or European importers – could be tactical retaliation, since India has taken steps in recent years to restrict Chinese tech and investments.
In the interim, Indian firms have explored stop-gap fixes. One workaround is to import larger sub-assemblies (like motor rotors) that already contain magnets, which aren’t directly subject to China’s new licensing rules. A few Indian manufacturers have considered this, but it’s not an easy solution. Buying assembled parts from China means higher costs and less value added in India, undermining local manufacturing incentives. It could also run afoul of India’s production-linked incentive (PLI) schemes, which demand a certain level of domestic content. Moreover, Chinese authorities might scrutinize such moves – if a Chinese supplier not previously in the business of exporting motor assemblies suddenly starts, it could raise red flags in the licensing process. In short, there is no quick or pain-free fix. As June wore on, some Indian automakers managed to eke by on remaining stockpiles and by prioritizing models, but industry officials warned that by July the situation would turn “really scary” without relief. The nascent EV sector is especially vulnerable, since EVs use more rare earth magnets per vehicle (for traction motors) than conventional cars do. Each week of stalled production is a setback for India’s clean mobility goals.
Long-Term Strategy: From Mines to Magnets
While scrambling to douse the immediate fire, India’s policymakers have also woken up to the urgent need for self-reliance in critical minerals. In fact, even before this crisis, the government launched a comprehensive plan in early 2025 to address such vulnerabilities. The National Critical Mineral Mission (NCMM), a seven-year initiative, was rolled out in April to bolster domestic exploration, mining, and processing of key minerals including rare earths. Under this mission, India has begun new exploration for neodymium and other REEs in its own soil, aiming to tap its large reserves. The mission comes with significant funding (reports indicate an outlay of ₹3,500–5,000 crore) to encourage both public and private players to boost rare earth extraction and value-addition. The government’s May 2025 economic review explicitly cited these steps to “mitigate possible disruptions” from China’s curbs.
A cornerstone of the strategy is to develop domestic magnet manufacturing. Prime Minister Modi’s government is drafting a scheme to offer production-linked incentives and fiscal support for making rare earth magnets in India. According to insiders, the policy may subsidize the cost difference between locally made magnets and cheaper Chinese imports to achieve cost parity. This would remove a key barrier that has kept domestic production unviable. The heavy industries ministry has been consulting with industry on these incentives and expects to finalize details imminently. In fact, several Indian companies and startups have already pitched proposals: for example, one plan envisions a new plant producing 500 tonnes of magnets annually by 2026, scaling to 5,000 tonnes by 2030. It’s ambitious, but such scale is what India needs to meet its surging demand. Government officials have urged realism, acknowledging that building a whole supply chain “from mines to magnets” will take years, but they insist the investment must start now.
On the upstream side, IREL (Indian Rare Earths Ltd) – India’s state-run rare earth miner – is being repurposed as a linchpin of domestic supply. Traditionally, IREL mined minerals from beach sands (monazite, etc.) and mostly supplied raw rare earth oxides for strategic sectors like nuclear energy and defense. Now it’s gearing up to support the civilian industry. The government has directed IREL to stop exporting rare earth feeds (notably to Japanese buyers) so that those materials can be processed and used at home. IREL is expanding its mining and refining capacity: it has a new extraction plant in Odisha and a refining facility in Kerala, and plans to produce 450 metric tons of refined neodymium in FY 2025–26, doubling that by 2030. This would be a meaningful increase (though still modest relative to demand). Importantly, IREL is seeking a joint-venture partner to manufacture finished magnets for industries like automotive and electronics. This is critical because converting ore into magnets involves complex alloying, tooling, and quality control steps that IREL alone has limited experience with. There are promising signs on the R&D front – India’s Bhabha Atomic Research Centre recently helped set up a pilot plant in Vizag to make samarium-cobalt magnets (mainly for defense) using indigenous tech. But scaling up magnet output for commercial EV use will require technology partnerships and substantial investment.
Diversifying external supply chains is the other pillar of India’s long-term game plan. New Delhi is aggressively pursuing international collaborations to reduce its over-reliance on any single source. One approach is through KABIL (Khanij Bidesh India Ltd) – a special-purpose joint venture of three Indian state-owned companies – which has a mandate to acquire stakes in overseas mines of lithium, cobalt, and rare earths. India has also joined the U.S.-led Mineral Security Partnership and is leveraging forums like the Quad alliance. For instance, Australia, a fellow Quad member, is emerging as a natural partner given its rich rare earth reserves and mining expertise. Australian producers (like Lynas Rare Earths) are among the few non-Chinese sources of processed REEs. India and Australia have held talks on collaborating in the rare earth supply chain and developing alternative refining capacity. Similarly, India is looking to Central Asia for new supply lines. Kazakhstan, in particular, boasts large deposits of 15 out of the 17 rare earth elements and has established extraction and processing capabilities. Strategically, Kazakhstan is seen as a promising alternative supplier: it’s geographically closer, maintains friendly relations with India, and has its own interest in diversifying away from Chinese dominance. In June 2025, India and five Central Asian nations (Kazakhstan included) even announced a joint interest in exploring and developing rare earth and critical mineral projects together. While these discussions are in early stages, they signal a proactive search for long-term supply security.
Ultimately, India’s response is a mix of immediate triage and structural reform. The country is learning the lesson that many others have in recent years: a robust EV and electronics industry cannot be built on imported critical minerals alone. It requires local capacity, allied supply networks, and policy support to level the playing field. The current crisis, painful as it is, may well provide the impetus for India to finally kick-start a domestic rare earth ecosystem that has lagged for decades. As one commentator put it, India has significant rare earth resources “but we aren’t doing much” – a situation that is now untenable.
Conclusion: A Critical Test for India’s EV Dreams
India’s EV ambitions hang in the balance. The government has set bold targets for electrification and attracted billions in investment to build batteries, vehicles, and charging infrastructure. Yet this entire effort could be stymied by a shortage of a few specialist metals if the rare earth bottleneck isn’t solved quickly. The recent Chinese export controls have spotlighted a single point of failure: without assured access to REE magnets, India’s automotive industry – from big car makers to the smallest EV startups – faces production stoppages and uncertainty at the very moment it is trying to scale up. As a result, policymakers and industry leaders are now treating rare earth supply as a strategic priority on par with oil security. India’s ability to negotiate a reopening of Chinese supplies in the short term, and to stand up its own supply chains in the long term, will determine whether its EV rollout stays on track or stalls out.
The message is sobering: unless India urgently addresses this rare earth chokehold, its EV aspirations will be seriously compromised. This means pulling every lever – diplomatic, financial, and technological – to secure magnets and the materials that go into them. In the immediate term, high-level engagement with Beijing (potentially even leader-to-leader discussions) may be needed to pry loose critical shipments. Concurrently, India must expedite the groundwork at home: accelerate the Critical Mineral Mission projects, clear regulatory roadblocks for mining, incentivize joint ventures for magnet manufacturing, and perhaps even stockpile critical REEs as a buffer. The country managed to ramp up semiconductor supply initiatives after the chip shortages of 2021; a similar all-hands-on-deck approach is now warranted for rare earths. The stakes are high. If India succeeds, it can insulate its green mobility revolution from external shocks and even become a player in the critical minerals arena. If it fails or moves too slowly, the “Make in India” story for EVs could be derailed by a component that costs only a few dollars yet is truly irreplaceable. The coming months will be a crucial test – one that will show whether India can turn a crisis into an opportunity to finally close the rare earth gap and power its future sustainably.