How Royal Enfield is tackling China's rare earth magnet ban
What's the story
Eicher Motors, the parent company of Royal Enfield, has revealed that a shortage of rare earth magnets impacted its Q1 performance. The disruption was mainly caused by China's export ban on this critical component. In response to this challenge, the company has started using alternative materials for its production processes. "We started working on the alternative material...at least about three or four months back," said Eicher's Managing Director B Govindarajan during a post-earnings call with analysts.
Impact on production
Impact on production of popular models
The shortage of rare earth magnets has affected the production of some popular Royal Enfield models including Himalayan, Scram, and Guerilla motorcycles. This comes as Indian two-wheeler manufacturers, especially e-scooter makers, are looking for alternatives to these magnets. China currently accounts for 90% of global rare earth magnet production.
Industry shift
Industry-wide search for alternatives
The search for alternatives isn't limited to Royal Enfield. India's leading e-scooter maker TVS Motor is also on the lookout for substitutes for rare earth magnets used in motors. Ola Electric has even claimed to have developed rare-earth-free motors, which it plans to deploy from the December quarter onward. These moves highlight a major shift within the industry amid China's export restrictions on rare earths.
Global repercussions
Eicher Motors posts strong quarterly profit
China's restrictions on rare earth exports have sent shockwaves through the global auto industry. Many companies have warned of a major supply shortage due to these curbs. Despite this, Eicher Motors has managed to beat profit estimates for the quarter ending June 30. The company posted a profit of ₹1,205 crore, up from ₹1,101 crore last year and above analysts' estimate of ₹1,117 crore according to data compiled by LSEG.