India’s automotive industry is once again facing turbulence—this time due to a looming shortage of rare earth magnets that threatens to derail electric vehicle (EV) production. With inventories expected to deplete by mid-July 2025, manufacturers are racing to find alternatives before the crisis stalls the sector’s momentum.
At the heart of the issue are neodymium-iron-boron (NdFeB) magnets, high-performance components critical to EV traction motors and electric power steering systems. Unlike ferrite magnets found in lower-stress applications like wiper motors, NdFeB magnets are prized for their superior magnetic strength and compact size—making them indispensable for performance-intensive automotive functions.
This looming shortfall is a direct consequence of tightening export controls and customs delays from China, which currently supplies the vast majority of India’s rare earth magnets. According to credit rating agency ICRA, China accounts for around 85% of the country’s imports of these magnets, valued at nearly $200 million in FY2025 for both auto and non-auto use.
“India’s auto sector is no stranger to supply chain shocks,” said Jitin Makkar, Senior Vice President at ICRA. “The current magnet crunch draws uncomfortable parallels with the semiconductor shortages that throttled vehicle production in 2021–22.”
While the overall trade value of magnets may not seem substantial, their impact on vehicle manufacturing is far-reaching. In electric two-wheelers alone, the motor cost ranges from ₹8,000 to ₹15,000, with rare earth magnets comprising roughly 30% of that cost. As production lines grow increasingly reliant on such components, their scarcity poses a severe threat to operational continuity.
Auto component suppliers and OEMs are evaluating a mix of short- and medium-term countermeasures. Some are considering importing fully assembled motors, while others are exploring the feasibility of sending parts to China for magnet integration before re-importing them—a workaround that presents its own logistical headaches. Alternative technologies, such as electromagnet-based or magnet-free motors, are also under examination. However, these would require swift prototyping, testing, and regulatory clearance to be viable in the current time frame.
Each path forward is riddled with challenges. Regulatory constraints, engineering hurdles, and production realignment timelines all stand in the way of quick fixes. Moreover, shifting away from rare earth reliance demands not just technological innovation but also a rethinking of India’s sourcing strategies.
The disruption comes at a time when India’s EV market is scaling rapidly, encouraged by government incentives and rising consumer interest. With the industry seeking to position itself as a global manufacturing hub, the current crisis underscores a critical vulnerability: overdependence on a single supplier for strategically important components.
Rather than being a temporary setback, the rare earth shortage could become a turning point—forcing Indian manufacturers to diversify their supply chains and invest in alternate motor technologies. It’s a wake-up call for the sector to build long-term resilience and reduce its exposure to external shocks.
How India responds in the coming months may shape the next chapter in its automotive story—one that could shift the focus from reactive sourcing to proactive innovation.
COMMENTS