India must develop rare earth magnet supply

New Delhi

India needs to quickly build its own rare earth magnet supply chain to avoid problems caused by China’s export restrictions, said a report by CareEdge Ratings. In April, China tightened controls on seven key rare earth elements (REEs), which are crucial for making magnets used in electric and hybrid vehicles. This has affected global supply and could hurt India’s auto industry.

Right now, India relies heavily on Chinese imports for REEs. The report warns that Indian carmakers may face production slowdowns by July 2025, especially for electric and high-end vehicles. Manufacturers may have to focus more on base or mid-range models that use fewer REE-based parts.

China currently produces 70% of REEs and processes 90% of them. The report highlights that India must reduce its dependence on a single country. Although China has briefly allowed exports to some U.S. companies, there’s no guarantee India will benefit.

To respond, India is considering new steps. This includes using technologies developed by government organisations, finding new suppliers in countries like Vietnam, Australia, and the U.S., and supporting domestic exploration. However, these alternative sources are not yet fully ready.

In the short term, Indian carmakers may import ready-made parts from China to keep factories running. In the long term, India wants to create a strong local REE ecosystem. Plans include boosting research, giving incentives to private companies, setting up strategic reserves, and forming global partnerships.

CareEdge suggests India must act quickly and follow a clear national strategy to avoid future risks and support its growing automotive industry.