Delays in export approvals for Chinese rare earth materials have sparked growing concern among global manufacturers, as Beijing’s new licensing regime begins to strain international supply chains for industries ranging from electric vehicles to defense systems, according to a recent Financial Times report.
In April, China implemented export controls on seven key rare earth elements and permanent magnets — materials crucial for products such as EVs, wind turbines, fighter jets, and even humanoid robots. While Beijing’s Ministry of Commerce has begun approving some shipments, primarily to Europe, the Financial Times notes that the sluggish pace of licensing threatens to trigger severe production disruptions across key sectors.
“The window to avoid significant damage to production in Europe is rapidly closing,” warned Wolfgang Niedermark, executive board member at Germany’s powerful industry group BDI. His remarks reflect a wider sentiment among manufacturers and supply chain experts who say the delays are “untenable,” particularly for foreign firms operating in China.
Industry insiders cited by the FT argue that the Chinese authorities appear unprepared for the bureaucratic complexity the new rules demand. One European executive based in China bluntly described the situation as one of “incompetence,” noting that regulators had underestimated the preparation needed at the operational level.
The export controls are widely seen as a response to sweeping tariffs announced by U.S. President Donald Trump in early April, escalating the ongoing economic rivalry between the two superpowers. Although a 90-day ceasefire in the tariff dispute was recently agreed upon, it remains unclear whether China has resumed licensing exports to the U.S.
Some companies, like Yantai Zhenghai Magnetic Material, reported having received licenses and resumed limited shipments. At least one rare earth shipment bound for Volkswagen’s German operations has been approved, according to sources, and VW confirmed that a “limited number” of licenses had been granted to its suppliers.
However, uncertainty remains the dominant mood. Elon Musk, CEO of Tesla, acknowledged in a recent investor call that China had sought assurances that rare earth magnets used in Tesla’s robotic manufacturing arms would not be repurposed for military applications. “That is an example of a challenge there. I’m confident we’ll overcome these issues,” he said.
The licensing process appears especially complicated for military-adjacent technologies. A manager at Chengdu Galaxy Magnets told the Financial Times that applications deemed to be “military-related” are being outright rejected, while non-military shipments may still proceed after proper documentation is submitted.
The new rules have led to concerns that Chinese authorities are leveraging their dominance in rare earth production for geopolitical gain. Rajesh Jejurikar, CEO of Indian auto giant Mahindra & Mahindra’s automotive division, said the process for obtaining end-use certification — which ensures materials won’t be used for weaponry — remains “unclear at the moment.”
Permanent magnets, which are central to advanced military equipment such as Lockheed Martin’s F-35 fighter jet, are particularly sensitive. Lockheed CFO Evan Scott reassured investors that the company has enough rare earth stock for the year, and expected U.S. authorities to prioritize their supply needs.
Analysts believe some large international companies with long-standing relationships in China have been quietly granted material access even before their licenses were formally approved. “There is still material going out,” said Cameron Johnson, a partner at Shanghai-based Tidalwave Solutions.
Cory Combs, associate director at Beijing consultancy Trivium China, echoed that sentiment, noting there is “no evidence” that China has completely halted exports. Still, he warned that the strategic nature of the controls adds to ongoing uncertainty. “China’s leverage relies partly on the ability to pull the export control lever if the U.S. fails to offer a satisfying deal,” Combs told the FT.
The new rare earth restrictions are expected to accelerate Western efforts to diversify supply chains and reduce dependence on China. But in the short term, industries dependent on these critical minerals face growing instability — a reality that is already starting to reshape global manufacturing strategies.
