Rare Earth Magnet Shortage Stalls India’s EV Ambitions

Subscribe to our free newsletter today to keep up to date with the latest mining and minerals news.

Recently, China tightened its grip on global rare earth supplies by introducing new export licensing controls on a range of critical minerals. These changes specifically targeted seven key rare earth elements and all finished magnet products. Companies now need to secure special licenses and provide end-use certificates, leading to uncertainty across the global electric vehicle supply chain.

For India, which remains heavily reliant on rare earth imports from China, the timing could not be worse. More than 80 percent of India’s rare-earth magnet imports originate from Chinese processors. These magnets are essential components in electric motors, particularly those used in electric vehicles. With China processing over 90 percent of the world’s rare earths, any delay or denial in shipments places immense pressure on manufacturing timelines.

This situation has emerged as a critical challenge for automakers like Maruti Suzuki, India’s largest passenger car manufacturer. The company is among the first in the country to directly confront the operational implications of the export restrictions. Though Maruti has not experienced immediate disruptions, it has already taken preemptive steps to manage the evolving situation. Among these is a significant reduction in the production of its first electric SUV, the e‑Vitara.

The broader context reveals a deep-rooted supply chain vulnerability. EV production, unlike internal combustion engine vehicles, depends on a relatively narrow band of high-performance materials. Rare earth magnets enable energy efficiency and miniaturization of components, both of which are critical for competitive EV designs. With current inventories providing only a few weeks of buffer, many in the Indian auto industry view the Chinese licensing regime as a potential choke point.

Maruti Suzuki slashes e‑Vitara output amid uncertainty

Despite not experiencing immediate operational disruptions, Maruti Suzuki has opted for a sharp downward revision in the production of its first electric vehicle, the e‑Vitara. Initially, the company had planned to manufacture approximately 26,500 units between April and September 2025. This figure has now been adjusted to around 8,200 units, representing a cut of nearly 66 percent.

The decision reflects more than just inventory constraints. It is a proactive response to a rapidly evolving landscape where visibility on future raw material availability has become blurred. Rare earth magnets, essential for the performance and efficiency of electric powertrains, are no longer guaranteed to arrive on schedule. With China’s export approval process facing delays of up to 45 days, many Indian firms are left waiting for clearance with limited recourse.

Maruti Suzuki has stated that while current supplies are sufficient for short-term operations, the company is pursuing multiple options to ensure production continuity. This includes evaluating alternative sources for critical components and working with Indian authorities to expedite pending import approvals.

The e‑Vitara was intended to be a flagship model, symbolizing Maruti’s shift toward electrification. The production cut not only signals the material impact of China’s policy decisions but also highlights the fragile nature of India’s EV manufacturing base. Though the company aims to make up the shortfall in the second half of fiscal year 2026, further supply disruptions could undermine its annual target of roughly 67,000 units.

Stakeholder communications have become a priority, with the company indicating it will provide updates should the situation worsen. While the broader production lines for internal combustion vehicles remain unaffected, the early adjustment in EV manufacturing highlights the reliance on imported components.

Supply chain risks deepen as inventories shrink

As the rare earth magnet crunch unfolds, the vulnerabilities of India’s automotive supply chain have come into sharp focus. At the center of this challenge is the narrow availability window of essential components like neodymium-based magnets. Most Indian automakers operate with a buffer inventory of just four to six weeks. With China’s new export licensing regime slowing shipments by more than 45 days, the risk of production stalls has become a real concern.

The situation is not confined to one manufacturer. Tata Motors has acknowledged the risk, although it claims to have sufficient inventory in the near term. The company is exploring alternate sourcing arrangements, including vendors in Japan and Australia, but these take time to scale. Mahindra and Mahindra has similarly intensified its supplier diversification efforts.

Crisil has noted that if the supply shortages continue into the next quarter, they could derail EV launch timelines and impact overall production capacity. Smaller suppliers may feel the impact first, particularly those in the two-wheeler segment.

SIAM and ACMA have urged the government to expedite import clearances and pursue diplomatic channels. Their concern is a domino effect in which one component delay affects the entire production process.

India’s dependence on China for high-grade magnets remains acute. Of the 540 metric tons imported last year, more than 80 percent came from Chinese producers. Even as automakers explore new suppliers, certifying and integrating these materials into production is not easily achieved.

Complicating matters is the opaque nature of China’s licensing process. Companies report unclear application requirements and extended approval timelines. Materials that once shipped within two weeks now face indefinite delays.

Manufacturers are re-evaluating schedules, pricing, and launch strategies. What was once a supply chain optimized for cost now demands resilience and redundancy.

India’s response around diplomacy, policy, and domestic sourcing

To counter the growing risk, India has adopted a multi-pronged strategy focused on diplomacy, policy, and long-term investments. The government is engaged in talks with Chinese authorities to clear pending license applications for rare earth magnets. As of June, over 30 requests are awaiting approval.

Domestically, the government is using the PLI scheme to boost local production of rare earth elements and magnets. Geological surveys are underway to identify viable mining locations. In parallel, partnerships with firms in Japan and Europe are being explored to transfer magnet processing technologies to India.

India is also encouraging recycling of rare earths from electronic waste and electric motors. While this approach offers limited volume, it helps supplement supply and improves material circularity.

To reduce customs delays, critical imports are being fast-tracked through designated green channels. The Ministry of Heavy Industries is coordinating with automakers to map and address supply chain vulnerabilities.

However, building a self-sufficient rare earth magnet ecosystem is a complex, capital-intensive process. Technical challenges, regulatory hurdles, and infrastructure constraints mean that domestic capabilities may take years to mature.

EV ambitions collide with geopolitics and resource realities

India aims for EVs to represent 30 percent of new car sales by 2030. However, rare earth dependencies threaten this trajectory. The sharp reduction in e‑Vitara production so soon after its launch reflects the fragility of India’s EV ecosystem.

Strategic materials such as rare earths are increasingly recognized as geopolitical assets. India’s dependence on Chinese exports leaves it exposed not just economically but diplomatically. As other nations diversify their supply chains, India is working to join these efforts through trade pacts, research collaboration, and new exploration.

Nevertheless, the path to material security is long. Rare earth refining and magnet production demand specialized expertise, tight environmental regulation, and sustained capital flow.

In the interim, Indian automakers are adjusting strategies. They are redesigning platforms to accommodate multiple sourcing options, delaying rollouts, and managing investor expectations.

What began as a supply chain challenge has evolved into a national industrial strategy discussion. India’s future as an EV leader will depend not just on consumer demand or automaker ambition, but on whether it can secure control over the foundational materials that power the electric revolution.

Sources:

• Reuters