How China's rare earth export restrictions affect India's EV ambitions
What's the story
India's electric vehicle (EV) sector is facing a major hurdle due to China's restrictions on the export of rare earth metals.
These materials are key components in the production of EV motors, and their restricted import from China has made things difficult for several Indian companies.
The issue was highlighted in a recent report by Jefferies, which warned that this could severely impact motor production and jeopardize the entire supply chain.
Response strategies
Importing fully assembled motors from China
In light of the current situation, some companies are looking at importing fully assembled motors from China.
However, this would require key changes in their supply chains and fresh homologation approvals for vehicles to comply with Indian standards.
This shift could also reduce domestic value addition, which is vital to qualify for the government's Production-Linked Incentive (PLI) scheme.
Export restrictions
China imposed export controls on 6 heavy rees
On April 4, China imposed export controls on six heavy rare earth elements (REEs) and rare earth magnets.
The country cited national security and international obligations such as non-proliferation as reasons for these restrictions.
Though not a complete ban on auto sector exports, companies now need prior government approval before exporting these materials from China—adding uncertainty and delays to the supply process.
Government response
India looking to create long-term stockpiles of rare earth magnets
The Indian government is aware of the growing risks posed by these restrictions.
According to a Reuters report, it is in talks with various companies to create long-term stockpiles of rare earth magnets.
As part of this plan, the Indian government may offer fiscal incentives to promote domestic production of these crucial components.
Supply chain dependence
Global supply chain for these elements is dependent on China
Despite their name, rare earth elements are not actually rare in the Earth's crust.
However, they are distributed in low concentrations, making extraction and processing difficult.
The global supply chain for these elements is heavily dependent on China, which accounts for about 70% of the world's mined REEs and roughly 90% of refined production.
China also produces nearly 90% of the world's rare earth magnets—especially heavy ones.