There’s troubling news for India’s electric vehicle (EV) industry. If the ongoing crisis related to rare earth mineral imports from China is not resolved soon, EV production may come to a standstill. This could result in a severe shortage of electric vehicles and a consequent spike in prices, directly impacting both manufacturers and consumers.
The crisis can be traced back to the trade tensions initiated during the Trump administration, when the United States imposed tariffs on Chinese goods. In retaliation, China began tightening export controls on critical minerals—including rare earth elements—that are vital to EV and electronics manufacturing worldwide.
Automobile Industry Under Pressure
The latest round of Chinese export restrictions officially took effect on April 4, 2025. Since then, strict limitations have been imposed on the purchase and export of key components. Indian firms have yet to receive the necessary clearances to resume imports. This development is expected to hit India’s fast-growing electric two-wheeler segment particularly hard.
Reports suggest that the ripple effects are already being felt by major automakers such as Maruti Suzuki, Hyundai, Tata Motors, Kia, TVS, and Bajaj Auto. Some companies have reportedly halted production of select models, with a complete shutdown of EV manufacturing looming by July if the situation does not improve.
Why Rare Earths Matter
Rare earth magnets are indispensable to the EV ecosystem. They are used extensively in components such as electric motors, e-axles, speedometers, electric water pumps, speakers, sensors, and ignition coils. Beyond automobiles, these minerals are crucial for clean energy technologies, the electronics industry, and various medical devices.
Currently, China dominates the global rare earth supply chain, producing nearly 90% of rare earth minerals and magnets. Other producers—such as Japan (7%), Vietnam (1%), and Ukraine—primarily meet their domestic demand, offering little surplus for export. This leaves India and many other nations highly dependent on Chinese supplies.
Possible Alternatives—But at a Cost
In response to the crisis, Indian automakers are considering alternate strategies. One approach is to import motors directly from China. Another is to ship Indian-manufactured motors to China for assembly and fitting of rare earth magnets, then re-import them to India. However, both options would significantly escalate production costs and undermine price competitiveness.
Time to Act: Building Domestic Capabilities
Recognising the urgency, the Indian government is actively exploring policy measures to incentivise domestic investment in rare earth processing and EV component manufacturing. Attractive financial incentives are under consideration to lure investors and reduce reliance on imports.
India is not devoid of mineral wealth. Alongside rare earths, the country has considerable reserves of lithium, cobalt, graphite, nickel, and other essential minerals. However, decades of policy inertia, bureaucratic delays, and insufficient exploration initiatives—both at the central and state levels—have left these resources underutilised.
As India positions itself to become the world’s third-largest economy, it is imperative to establish robust mining, processing, and supply chain infrastructure for critical minerals. This demands a long-term vision, strategic planning, and disciplined execution to ensure resilience in vital sectors such as electric mobility, clean energy, and electronics.
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