Thursday 23 / October / 2025
Necessity is the mother of invention. With China restricting the supply of rare earths, major auto-makers in the US, Germany, Japan and India are developing EVs that do not use rare earths for their batteries.
In 2010 China first started using the supply of rare earths as a weapon. To force Tokyo to submit to China's claims in the dispute over the Senkaku Islands, Beijing restricted the export of rare earths to Japan; a move that had threatened the Japanese automobile industry. Subsequently, Japanese companies have been making efforts to manufacture products without the use of Chinese rare earths.
The latest curbs imposed by China on October 9 on the export of rare earth elements (REE) and technologies related to them are a clear indication that Beijing is using the advantage of abundant deposits of rare earths at its disposal — about half of the world's rare earth deposits are estimated to be in China — to blackmail other countries.
The timing of the curbs was designed to put pressure on the US for Beijing to get supplies of advanced semiconductors for defense use. US President Donald Trump and President of China Xi Jinping are likely to meet at the end of October in Kuala Lumpur. “The White House and relevant agencies are closely assessing any impact from the new rules, which were announced without any notice and imposed in an apparent effort to exert control over the entire world’s technology supply chains,” Reuters has quoted a White House official.
In 2018, China began imposing controls on a global scale on the export of rare earths; Primarily affecting the US military industry. The US, however, managed supplies through third countries like Thailand and Mexico which in turn sourced the items directly from China. In December 2023, to use rare earths as a bargaining chip with western countries and gain access to advanced microchips, China imposed strict export controls on rare earth processing and refining technologies and introduced additional regulations to restrict the export of rare earths.
In April last, when President Donald Trump imposed additional tariffs on Chinese products, Beijing imposed export controls on a variety of heavy rare earth materials, directed against the US and some other countries; Including India, and putting the automobile sector in India in difficulty.
These rare earth elements export license requirements of China, introduced in April, have disrupted the global supply chain in rare earths. Under this, companies need to apply for an export license from the Commerce Department of the State Council before they can export seven different types of medium and heavy REEs from China. An application may take a minimum of 45 days to process, and more for “sensitive” supplies.
The easing of export restrictions on rare earths by Beijing following Washington’s easing of tariff restrictions on China in May is proving to be eye-wash. For, in the same vein, state control over the supply chain of rare earths elements used in electrical vehicles and defence systems were strengthened through regulatory measures introduced on July 28 by Beijing. These strengthen state control over the entire rare earth supply chain, from mining to processing and export, and introduce more stringent environmental standards. These regulations have impacted global supply chains by restricting the export of key rare earth elements. This may cause short-term disruption, increase costs for high-tech industries, and potentially slow down the manufacturing of products like electric vehicles and defence systems.
Under these regulations, each rare earth producing company is required to report the status of its monthly and annual total quantity control targets to the local county-level industry, IT and natural resources departments which in turn will have to consolidate these reports and send them to the higher-ups. Companies must now also track the flow of rare earth products and upload them to platforms of the Ministry of Industry and Information Technology by the 10th of each month.
Consequently, auto majors like Ford and Suzuki had to give pause in production in the absence of items carrying REEs. Japanese auto manufacturers have faced particularly onerous and unrealistic demands like having to list every end-use product containing rare earth materials. European auto manufacturers are also severely affected by delay in supplies from Chinese exporters, particularly in the supply of rare earth magnets.
Though in August Beijing withdrew its export restrictions on rare earth magnets to India, till September 9 Indian companies were yet to have a single import application approved. India continues to remain effectively cut off. Beijing has reportedly sought a guarantee from India that rare earth supplies would not be re-exported to the US.
The export control order on October 9 imposed more restrictions on mining and processing of rare earth minerals, under the excuse that unnamed foreign firms were using the supplies for military purposes. Five new elements were brought under the purview of license and provision for extra scrutiny for semiconductor users. Foreign rare earth producers who use Chinese materials will also have to comply with the new regulations.
But Beijing should wait a little. The US, the European Union and others are racing to build alternatives to the Chinese rare earth supply chain. Auto majors internationally are working on alternative technologies. Tesla, BMW, General Motors, Borowarner, Jaguar, Land Rover, ZF, Vitesco, Renault, Nissan, Mercedes-Benz, Toyota and Bentley are working on rare-earth free next generation models of electric vehicles.
Tesla has cut heavy rare earths by 25 percent per vehicle and plans to go rare-earth free in its next generation EV models. BMW uses no rare earth permanent magnets today and has developed a machine that generates a magnetic field using electric current. The fifth generation electric motors of BMW have been described as a masterpiece that combines “an old school sensibility with high tech EV technology that actually improves efficiency without the use of rare earth minerals. This will be used in all its next-generation EVs.
General Motors is exploring options to limit or potentially eliminate rare earth materials in EV motors. Mercedes-Benz has reduced the heavy rare earth content in its next-generation electrical vehicles “close to 0 percent.” Toyota is working on a permanent magnet with 50 percent reduction on a heavy rare earth. Marelli is exploring the use of alternative materials to meet the requirement of magnet-free motors.
In India, the Indian Institute of Technology, Delhi, is putting efforts into developing motors that require fewer or no rare earth elements. To manufacture traditional permanent magnet motors, neodymium and dysprosium are imported in significant amounts from China; leading to supply chain problems due to political risks and global tensions.
Auto majors, globally, are thus poised to break free from China’s arm-twisting over rare earths supplies.
