Indian Auto Industry on Cross Roads
China’s recent export restrictions on rare earth magnets, particularly neodymium-based magnets essential for electric vehicle (EV) motors, have placed India’s EV industry in a precarious position.
The Current Situation
As of April 2025, China has implemented stringent export controls on rare earth magnets, requiring exporters to obtain licenses and submit detailed end-use documentation to ensure the materials are not used for military or restricted purposes . These magnets are critical components in EV motors, and China controls over 90% of the global supply for the four magnet rare earth elements (Nd, Pr, Dy, Tb) .
The Indian auto industry has raised serious concerns to the government regarding disruptions in the supply of these magnets from China. Automakers are warning that production of some models will stop as early as this week, and if the situation continues unresolved, it could lead to a complete shutdown of automobile production by mid-July 2025 .
Industry Voices & Warnings
Rajiv Bajaj, Managing Director of Bajaj Auto, has been vocal about this issue. He has warned that India’s EV industry remains critically dependent on China for heavy rare earth magnets, and this dependence poses a significant risk . Bajaj Auto’s electric scooter, the Chetak, uses a neodymium-based magnet in its motor, and any disruption in supply can impact its production .
Other automakers, including Maruti Suzuki, have stated that there is currently no immediate impact on their production from China’s new export restrictions. However, they have submitted import applications and are in discussions with the Indian government, acknowledging that the complexity of the new import process could create supply chain disruptions .
The Path Forward
This situation underscores the urgent need for India to diversify its supply chain and reduce dependence on a single source for critical components. Exploring alternative suppliers, investing in domestic production capabilities, and developing recycling infrastructure for rare earth elements are potential strategies to mitigate such risks in the future.
The current crisis serves as a wake-up call for the Indian EV industry to build a more resilient and self-reliant ecosystem.