Electric vehicles might become costlier in India soon
What's the story
India's EV industry is facing a supply chain crisis due to shortage of rare earth magnets. These components are used in electric motors, which are critical for EV propulsion systems.
The problem has been exacerbated by China's decision to tighten export controls on these magnets, impacting Indian automakers.
If the supply disruption continues, manufacturers may have no choice but to pass on the increased costs to consumers. This could result in price hikes of up to 8% for EV models.
Export controls
China's export restrictions and its implications for India
China's export restrictions on rare earth magnets are seen as a strategic response to US-led trade pressure, especially under President Donald Trump's administration.
The move has resulted in a halt of magnet imports, with no end in sight.
This has raised fears of major disruptions in automobile production across India, including the EV sector.
Steps
A look at the new sourcing process
Indian manufacturers now have to self-declare the end use of rare earth magnets, go through a multi-tiered certification process with Indian authorities, and wait for final approval from the Chinese embassy.
So far, only nine out of 17 applications have been approved by the Chinese embassy in India. The rest are still pending.
Industry reliance
Why are rare earth magnets critical for EVs?
Rare earth magnets are critical components of Brushless DC (BLDC) and Permanent Magnet Synchronous Motor (PMSM) motors, which power EVs.
China produces nearly 90% of the world's magnets, making it hard to find alternatives quickly or at a reasonable cost.
Options from Malaysia, Vietnam, or Australia aren't viable due to their limited scale and cost competitiveness.
Statistics
India has 5th-largest reserve of rare earth metals
Two years back, India imported $13.1 million worth of rare earth compounds, and ranked 17th globally.
Despite having the fifth-biggest reserves of rare earth metals (around 6.9 million metric tons), actual production was only 2,900 metric tons last year.
This suggests a long-standing vulnerability: a domestic supply chain that simply doesn't exist for these critical components.