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Indian EV makers face uncertain future as China tightens grip on rare earth metal exports

Upstox
By Upstox News Desk

2 min read | Updated on June 02, 2025, 14:02 IST

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SUMMARY

While India holds the fifth-largest reserves of rare earth metals, its production remains limited. IREL (India) Ltd — formerly Indian Rare Earths — produces just 1,500 tonnes of neodymium-praseodymium (NdPr) annually and lacks the infrastructure to manufacture downstream magnet components at scale.

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BAJAJ-AUTO
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TVSMOTOR
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Electric two-wheelers

Electric two-wheelers are vulnerable due to their dependence on neodymium-iron-boron (NdFeB) magnets. | Image: Shutterstock

India’s electric vehicle (EV) manufacturers are heading into turbulent territory as China’s newly imposed export restrictions on rare earth metals (REMs) magnets spark fears of an imminent supply crunch. REMs are critical for making electric motors, and Indian EV companies now face a potential production slowdown as inventories dwindle.

According to a Business Standard report, Indian EV original equipment manufacturers (OEMs) currently have REM magnet stockpiles that may last only six to eight weeks. With no immediate alternative sources in sight, production risks loom large, particularly for electric two-wheelers.
In an interview with CNBC-TV18, TVS Motor Managing Director Sudarshan Venu also raised concerns regarding the shortage. "The impact of the ban will begin to reflect in production by June or July," he told CNBC TV18.

He added that electric two-wheelers — India’s fastest-growing EV category — are particularly vulnerable due to their dependence on neodymium-iron-boron (NdFeB) magnets, which offer a high power-to-weight ratio. Each two-wheeler uses approximately 600 grams of these magnets.

China dominates global REM magnet production, accounting for 92% of supply. Japan (7%) and Vietnam (1%) provide only minor output, primarily for their own domestic needs. Other potential sources, such as Ukraine, remain inaccessible due to the ongoing war. Industry insiders report that efforts by auto industry bodies SIAM and ACMA to engage with Chinese counterparts have yet to gain traction, the Business Standard report said.

While India holds the fifth-largest reserves of rare earth metals, its production remains limited. IREL (India) Ltd — formerly Indian Rare Earths — produces just 1,500 tonnes of neodymium-praseodymium (NdPr) annually and lacks the infrastructure to manufacture downstream magnet components at scale.

Substitutes for Chinese REMs are not readily available and would require extensive investment in research, testing, and validation. That means any meaningful shift to alternative sources remains a mid-to-long-term possibility, not an immediate fix, Business Standard report added.

Bajaj Auto echoed the sector’s anxiety during its Q4FY25 earnings call last week, calling the situation a “dark cloud on the horizon.” The company warned of serious production disruptions as early as July unless urgent solutions are found.

Shares of Bajaj Auto fell 1.3%, TVS Motor shares declined 0.59% and Ola Electric rose 4%.

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Upstox
Upstox News Desk is a team of journalists who passionately cover stock markets, economy, commodities, latest business trends, and personal finance.