Auto equipment manufacturers make 2-pronged plans for rare earth crunch

Firms weigh importing motors or sending parts to China to keep assembly lines running

Automotive (auto) original equipment manufacturers — which have not received any supply of rare earth magnets from China since April 4, nor any response to requests from 35 companies for import licences — have put together a two-pronged strategy to avert production shutdowns by the end of this month. 

Many companies are exploring the option of importing motors or sending motor sub-assemblies to China, where they can be fitted with rare earth magnets and then shipped back to India. The workaround could offer temporary relief, as China’s restrictions apply to magnets, not finished products. However, both alternatives would drive up motor costs. 

Separately, a delegation comprising representatives from Tata Motors, TVS Motor Company, Mahindra & Mahindra, Ather Energy, Hero MotoCorp, Maruti Suzuki India (MSIL), the Society of Indian Automobile Manufacturers, the Automotive Component Manufacturers Association of India, and a few component suppliers has sought a meeting with China’s commerce ministry, which is handling the matter. 

The Indian embassy in China has been tasked with scheduling the appointment; however, no time has been allotted or confirmed yet. Some delegation members are still waiting for visas. 

The magnet shortage has hit electric vehicles harder, particularly two-wheelers.  

Says a senior executive at MSIL: “The requirement for rare earth magnets is much lower in internal combustion engine vehicles than in electric ones. We’re not in a crisis just yet.” 

“We are currently analysing the situation and monitoring all key developments. We continue to be optimistic that with the combined efforts from both the industry and government the situation will get resolved soon,” says Anurag Mehrotra, managing director, JSW MG Motor India. 

Industry estimates put the annual requirement for rare earth magnets at 500 tonnes for two-wheelers and 300 tonnes for cars. The total spend is around Rs 306 crore. 

The issue is also being taken up at senior levels within the government, under the Ministry of Heavy Industries. “The matter requires direct intervention at the top. As one gets to the negotiating table with China, there has to be some give and take. For instance, China has its own concerns, such as visa clearances for its executives,” says a senior executive at an auto company.

While importing motors remains an option, it isn’t simple — they must be customised for specific vehicles. Even if a suitable motor is available, it must undergo testing and validation, which could take months. In the case of sub-assemblies, the logistics of shipping them to China and back would delay timelines and add costs. 

The problem isn’t limited to India. MSIL, for example, has halted production of the Swift due to rare earth supply curbs, becoming the first Japanese company affected by China’s restrictions. Globally, some automakers are now considering relocating certain parts of the supply chain to China to sidestep the growing problem. 

China controls more than 90 per cent of the global supply of rare earth metals, which allow magnets to operate at high temperatures. 

It was earlier expected to ease export restrictions to the US after both countries agreed to reduce tariffs for 90 days, but that has yet to happen.