Inventories of rare earth magnets may run dry by mid-July, says Icra

ICRA warns that rare-earth magnet inventories for EV motors may run dry by mid-July as China tightens export rules, leaving Indian auto makers facing serious supply disruption

Inventories of rare-earth magnets used in critical automotive components — particularly electric vehicle (EV) traction motors and power steering systems — could run dry by mid-July this year, according to rating agency Icra. 

 

With China enforcing tighter export controls, industry stakeholders are staring at serious supply bottlenecks that could disrupt vehicle production, especially in the rapidly expanding EV segment. China is the source of nearly 85 per cent of India’s rare earth magnet imports.

 

“The rare-earth magnet supply shock is a serious concern, particularly for EVs and premium passenger vehicles,” said Jitin Makkar, senior vice president and group head – corporate ratings, Icra. “Rare-earth magnets, especially neodymium-iron-boron (NdFeB), are indispensable for high-efficiency traction motors and other advanced automotive systems. With inventories expected to deplete by mid-July, contingency planning has become urgent.”

 

 

Icra’s warning comes after weeks of shipment delays, which began escalating in April this year as Chinese authorities introduced new licensing rules and also intensified inspections. Customs clearances have slowed down significantly, creating unpredictable shipping timelines and uncertainty about future availability.

 

Crisil, another rating agency, has also flagged this as a significant risk to automotive supply chains. According to its estimates, the current disruption could affect up to 6-7 per cent of quarterly EV production if the issue remains unresolved within the next two months. 

 

India imported approximately $200 million worth of rare earth magnets in 2024-25 (FY25), a majority of which was used in automotive and industrial applications. Although the trade value is relatively modest, the strategic reliance on China for these specialised components is now under the spotlight.

 

In electric two-wheelers alone, motors typically cost between ₹8,000 and ₹15,000, and rare earth magnets account for nearly 30 per cent of the motor cost. These magnets are prized for their high magnetic strength, energy efficiency, and thermal stability — properties that are difficult to replicate with conventional alternatives like ferrite magnets.

 

“The situation has exposed the fragility of India’s high-tech component supply chain,” said an executive from a leading auto components firm. “Unlike semiconductors, where global players already have a playbook, the options for rare-earth magnets are more limited and fragmented.” 

 

To navigate the crisis, automakers and component suppliers are exploring several stop-gap solutions, including importing fully assembled motors from China, shipping rotors to China for magnet assembly and re-importing them, experimenting with engineered alternatives that replicate the magnetic performance of rare earths without being classified as such, and accelerating the development of magnet-free motors that rely on inductive or electromagnet-based technologies.

 

However, each of these options presents its own set of challenges. “These are not quick fixes,” Makkar said. “They involve engineering validation, regulatory clearances, and logistics that could take months to stabilise.”

 

The current crunch has reignited calls for building domestic capabilities in rare earth processing and advanced magnet manufacturing. India has rare earth reserves but lacks large-scale refining and separation infrastructure, which is key to producing high-performance magnets like NdFeB.