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The automobile industry has sought government support in expediting approvals from the Chinese government for importing rare earth magnets used in various applications, including passenger cars.

As per the industry sources, various domestic suppliers have already sought approval from the Chinese government through their local vendors in China.

However, no approvals have been granted so far, sources said. China controls over 90 per cent of global processing capacity for the magnets, used across multiple sectors including automobiles, home appliances and clean energy.

The Chinese government has put restrictions, with effect from April 4, mandating special export licences for seven rare earth elements and related magnets.

In Japan, Suzuki Motor has already suspended production of its Swift car because of China's curbs. Last week, Maruti Suzuki India Senior Executive Officer (Corporate Affairs) Rahul Bharti said China has asked for an end-user certificate, endorsed by the Indian government and approved by the Chinese government. "So that process is on and industry is in discussion with the government," he stated.

Deloitte India Partner and Automotive Sector Leader Rajat Mahajan noted that the shortage is a major supply chain disruption especially for EVs as rare earth metals are used extensively in the electric motor which is a core component.

Rare earth magnets have high magnetic energy storage capacity with low coercivity at high operating temperatures.

"This has been an R&D topic for the automotive industry for a long time but till now other magnetic materials have not seen large scale commercial usage in applications like EV," he noted.

Also, there are not enough rare earth magnets to recycle at this point in time to satisfy the EV volumes, Mahajan said. It will not be easy for OEMs to suddenly change course on powertrain as well as on alternate material.

"This situation will hopefully get resolved via diplomatic channels, but if it continues then we may see a shift towards powertrains for large OEMs," he said.

Icra Senior Vice President & Co-Group Head Corporate Ratings Srikumar Krishnamurthy noted that rare earth magnets are used for multiple applications in EVs - electric motors, regenerative braking systems, power steering etc.

Given that China accounts for around 90 per cent of the overall supply for rare earth magnets, the curb on export of the same by China can have material implications for the EV industry, he added.

"The implications could include inflationary pressures (led by higher cost for rare earth magnets against the backdrop of shortage) or even disruption in production schedules in absence of a seamless supply of the same," Krishnamurthy stated.

While OEMs are evaluating options to reduce dependence on the supply of rare earth magnets, finding immediate alternatives is going to be challenging, he said.

The critical materials include, samarium, gadolinium, terbium, dysprosium and lutetium, which are essential in electric motors, braking systems, smartphones and missile technology. 

(This report has been published as part of the auto-generated syndicate wire feed. Apart from the headline, no editing has been done in the copy by ABP Live.)