China’s tightened grip on rare earth metals is already hitting the Indian auto industry: automakers are stripping back equipment. Royal Enfield has tried out a temporary hack for its gear position sensor as the global shortages bite, exposing vulnerabilities in vehicle supply chains. Other automakers too are cutting down on certain non-essential equipment in their vehicles to reduce the usage of rare earth materials as uncertainty over China’s green light to export the key materials looms.
In a missive to new customers, Royal Enfield said that it had “temporarily installed” a neutral indication system in the motorbike due to the “ongoing global shortage of rare-earth materials, which are key to manufacturing the magnets in gear position sensors”. “We are working to mitigate these supply chain issues and, as soon as the Gear Position Sensor is available, we will retro-fit it in your motorcycle at no additional cost,” the company said.
A source aware of the development said that it was unclear when the company would be able to source the sensor, but was looking at geographies beyond China.
Chinese curbs on critical minerals
Following US President Donald Trump’s tariff onslaught on other countries in April, China implemented specifically designed bureaucratic hurdles for foreign companies looking to source critical minerals from the country. The materials are crucial for the automobile sector, and Indian carmakers’ applications to secure them from China have proved to be unsuccessful so far.
Royal Enfield did not respond to a request for comment.
A large Indian carmaker is learnt to have tweaked its central console to do away with the gear position indicator in its automatic models as a stop gap measure to rationalise rare earth magnet supplies for more essential applications, including automatic transmissions, throttle bodies, sensors, seat belts, power steering, power windows and cameras.
It is learnt that in June 2025, the Indian arms of a European automaker had their application for rare earth magnet shipments from China rejected, while applications made by the European headquarter received approvals. While the Chinese government has not imposed an outright ban on the export of rare earth magnets—a crucial element in making electric vehicles—the process has been made very difficult, which could take up a long time and pose shortage risks in the meantime.
Some applications were routed through the Ministry of Commerce (DGFT), but then Beijing insisted that it be forwarded by India’s Ministry of External Affairs, with end-use certifications being insisted upon in most cases by the Chinese side. The back-and-forth has lead to sharply increased sourcing timelines and uncertainty over supplies.
The restrictions on rare earth magnet and related materials imposed by China has led to vehicle manufacturers, especially EV makers, staring at a potential shortage of the critical components, which raises concerns of price hikes and production delays in a nascent, cost-sensitive segment of the auto market. This is especially so for neodymium-iron-boron (NdFeB) magnets used in EV motors.
Growing need
Consumption of permanent magnets has grown significantly in India over the last five financial years—from just 12,400 tonnes in FY21 to 28,700 tonnes in FY24, before imports surged 88 per cent to 53,700 tonnes in FY25.
Rare earth elements magnets tend to retain their properties almost permanently, and they are far lighter than traditional magnets made out of iron. While the availability of rare earth metals is not limited to China, it is in the efficient processing of these critical elements where Beijing has a substantial lead, which was once enjoyed by the US and Japan.
In response to the US administration’s reciprocal tariff heat, China restricted exports of seven heavy rare earth metals including samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium, as well as rare earth magnets. Earlier, it had also banned exports to the US of gallium, germanium, antimony, and other key high-tech materials with potential military applications.
However, with the recent diplomatic breakthrough under which India and China have announced a slew to measures in a seeming thaw in the tense ties, automakers are hopeful that the restrictions on rare earth materials could see some easing.
Responding to questions on the issue in July, MEA official spokesperson Randhir Jaiswal had said, “On rare earths, yes, we have been in touch with the Chinese side both in Delhi as also in Beijing and we are talking to them as to how we can streamline the supply chain issue on rare earths.”
Currently, IREL (India) Ltd, a PSU under the Department of Atomic Energy, refines rare earth oxides from heavy metal ores, containing REEs like cerium, lanthanum, neodymium, and praseodymium. However, production is limited. Moreover, the processing of refining oxides into alloys—and then into magnets—is highly technical and virtually non-existent in India.
Rare earth elements magnets tend to retain their properties almost permanently, and they are far lighter than traditional magnets made out of iron. (File Photo) 
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