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As many as four Indian companies, including DE Diamond, Hitachi and Continental India, are learnt to have bagged permits to import Chinese rare earth magnets in what is the first set of clearances since Beijing imposed tight controls on the export of these magnets earlier in April. The clearances have been bagged by the Indian arms of some of these companies that supply equipment to the country’s automotive sector and are learnt to be subject to export controls and myriad other conditions. The permissions are conditional and not for all applications, industry sources indicated.
New restrictions on rare earth magnet and related materials from China that kicked in from April 4 have impacted automakers across the world, including vehicle manufacturers in India. EV makers here are particularly affected, and have been 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.
The Indian car industry had initiated a conversation with the government to smoothen the process for procuring the rare earth magnets from Beijing. While the Chinese government had not imposed an outright ban on the export of rare earth magnets—a crucial element in making electric vehicles—the process had been made very difficult, which could take up a long time and posed shortage risks in the meantime.
Rare earth magnets, especially neodymium-iron-boron (NdFeB) magnets, are crucial for EV manufacturing, particularly in electric motors. They provide the strong magnetic fields needed for efficient and powerful electric motors, including traction motors that drive EVs. These magnets also play a major role in other EV components like power steering systems, wiper motors, and braking systems. China has a stranglehold over these rare earth magnets.
A senior executive from the Indian car industry had earlier told The Indian Express that importers were required to give their Chinese suppliers an undertaking that the rare earth magnets procured from that country would only be used in vehicles, and not for defence or military applications. These requests and undertakings had to also be routed through multiple government departments in India, before being forwarded to the Chinese authorises.
“What made the process more cumbersome further is that the Chinese side had also started insisting that local governments issue an endorsement for their importers. In our case that would be the Director General of Foreign Trade (DGFT), which had to endorse each importer separately. A separate authorisation was also sought from the Chinese Embassy,” the executive said on condition of anonymity. “We are also looking at sourcing rare earth magnets from alternate sources, but China is really the leader in the field. It could take some time,” a second executive said.
Over the past few months, Indian carmakers had pretty much used up inventories and shortages were projected going forward. Worrying still was a fresh insistence from Beijing that instead of sourcing magnets separately, carmakers buy entire electric motor assemblies from Chinese companies, or simply wait for the Chinese authorities to issue export permits to local rare earth magnet producers, as has been done, according to Reuters, for at least four magnet producers that include suppliers to Volkswagen – the first granted since Beijing restricted shipments in June. The German carmaker is said to have lobbied hard with Beijing to get this done.
The problem with sourcing entire motors, as against just the magnets in them, is that carmakers would have to redesign their cars to accommodate the entire motor assembly, which comes in standard sizes. The ability to import magnets meant that manufacturers could calibrate the motor sizes to the design of their vehicles.
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 recent years, Japan has been able to restart some of its minerals’ processing industry owing to government policies, but countries like the US and India are heavily dependent on Chinese exports of these metals.
In response to the US administration’s reciprocal tariff heat, China had also restricted exports of seven heavy rare earth metals including samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium, as well as rare earth magnets earlier this year. A few months ago, it had banned exports to the US of gallium, germanium, antimony, and other key high-tech materials with potential military applications.
More rare earths were added to the restricted list this month, coming just ahead of the meeting of leaders from both countries in Busan.
(The writer is in Tokyo on the invitation of Maruti Suzuki India)
