Urgency grows in Motown India as rare earth deadlock deepens, call goes out to govt for help

The Indian automobile industry is facing a significant challenge due to recent restrictions imposed by the Chinese government on the export of rare earth magnets. These magnets are critical components in many applications, including passenger vehicles and electric vehicles (EVs). Suppliers have been attempting to secure approvals from China through local vendors, but no approvals have been granted thus far, news agency PTI reported on June 8 citing industry sources.

China is a dominant player in the rare earth magnet market, controlling over 90 per cent of the global processing capacity. The Chinese government implemented new regulations on April 4, requiring special export licences for seven rare earth elements and related magnets. This decision has already impacted manufacturers beyond India; for instance, Suzuki Motor in Japan has halted production of its Swift model due to these curbs.

Industry response

In response to the situation, Maruti Suzuki India’s Senior Executive Officer, Rahul Bharti, indicated that China is now requiring an end-user certificate, which must be endorsed by the Indian government. He stated, “So that process is on and industry is in discussion with the government.”

Experts in the automotive sector are expressing growing concern about the repercussions of this supply chain disruption. Rajat Mahajan, a Deloitte India Partner, highlighted the significance of rare earth metals in electric motors, noting that the shortage poses a serious risk to the production of EVs.

He said, “This has been an R&D topic for the automotive industry for a long time but till now other magnetic materials have not seen large scale commercial usage in applications like EV.”

Potential implications

The implications of these export restrictions could be substantial. Srikumar Krishnamurthy, Senior Vice President at ICRA, pointed out that rare earth magnets are essential for multiple functionalities in EVs, including electric motors and regenerative braking systems.

He warned that continued restrictions could lead to “inflationary pressures” and disrupt production schedules if a steady supply of these materials is not established.

As the industry evaluates alternatives to reduce reliance on rare earth magnets, experts caution that finding immediate substitutes will prove challenging. The critical materials involved include samarium, gadolinium, terbium, dysprosium, and lutetium, all of which are vital not only in automotive applications but also in other technologies such as smartphones and missile systems.

While industry leaders are hopeful for a resolution through diplomatic channels, the urgency of the situation cannot be overstated, PTI's report said. As the automobile sector continues to grapple with these challenges, the need for government intervention and support has never been more critical, it added.