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India’s leading automakers have approached the Commerce Ministry with urgent concerns that a disruption in the supply of rare earth magnets from China could bring their production to a standstill, according to a Mint report citing three industry executives familiar with the matter.

Representatives from the Society of Indian Automobile Manufacturers (SIAM) and the Automotive Component Manufacturers Association of India (ACMA) are scheduled to meet ministry officials Monday afternoon to press for government intervention, the executives said.

Two of the executives also revealed that industry representatives had taken the matter to the Prime Minister’s Office on Friday, added the report.

China, which dominates the global supply of rare earth magnets, has begun restricting exports amid rising trade tensions with the United States. These magnets are critical for manufacturing compact and energy-efficient electric motors, and the tightening of supply is now threatening to impact not only electric vehicles but the broader auto sector as well.

“Headlines talk about EVs getting impacted, but in fact any part that needs a motor is under this threat. Hence, the entire ICE (internal combustion engine) portfolio is also under stress," one of the executives said in the report, adding that if no solution is reached, the crisis could potentially hurt production volumes. 

Without government-level intervention, the executive warned, the situation could severely impact production volumes across the automotive sector.

“Frankly, there is no solution unless the Government of India intervenes with China at a political or administrative level and strikes a deal. They need to… get some relaxations for the industry like how the US and UK got relaxations," the executive added in the report.

Export Licences Now Mandatory

While China hasn’t completely halted magnet exports, a new policy requires that all shipments be approved via a government-issued licence. According to the Chinese Communist Party’s directive, importers must provide detailed documentation, including photographs of the end-use product, a non-reexport declaration, and proof that the magnets won’t be used for military purposes. Approval from the importing country’s government is also necessary.

Licences take approximately 45 days to be granted and are valid for six months.

“The new customs policy effectively requires controlled management of all rare earth-containing magnets. Therefore, we need to apply for an ‌export licence‌ for magnets. This applies even to samples," a Chinese supplier wrote in an email to an Indian motor manufacturer.

“This is the only solution for exporting magnet [sic] in China," the Chinese vendor wrote, as per the report.

Some Chinese suppliers are urging Indian buyers to purchase complete motors rather than individual magnets, a workaround that the Indian industry says is not feasible. "Chinese suppliers want us Indian players to take the motors directly and not the magnets. But we cannot do this because it will hurt the entire localisation bid of the government and auto players," said a senior executive from an Indian auto component manufacturer in the report.