Indian automakers are bracing for potential production halts as Beijing’s tightened restrictions on rare earth minerals and magnets continue to disrupt crucial supply chains, according to industry insiders cited by Nikkei Asia. The pressure comes at a challenging time, with vehicle sales growth already slowing in India’s competitive automotive market.
Rare earth elements are indispensable for the production of a wide range of automotive components—from electric seats, steering systems, and brakes to wipers and audio units. They are also essential in gasoline engines and electric vehicle motors due to their resilience at high temperatures.
In April, China imposed stringent controls on exports of seven key rare earth minerals and magnets, alongside increased tariffs on U.S. imports, intensifying the fallout from the ongoing U.S.-China trade war. Despite a truce between the two economic powers, rare earth export approvals remain scarce.
India, the world’s fourth-largest vehicle producer last year, has seen its rare earth imports from China effectively frozen, industry executives told Nikkei Asia. “Suppliers usually keep stocks of three to six weeks, but those reserves are nearly depleted,” one senior executive said, requesting anonymity due to the issue’s sensitivity. He added that the export licensing process imposed by Beijing involves cumbersome paperwork and lengthy delays.
Applications to clear imports require multiple approvals—from India’s Directorate General of Foreign Trade, Ministry of External Affairs, the Chinese Embassy in Delhi, and finally China’s commerce ministry. More than 20 clearance requests remain pending with no approvals granted yet.
The Indian government is actively involved in addressing the crisis. “The situation has been escalated to the top level, with close monitoring by the Prime Minister’s Office,” another industry source told Nikkei Asia. The Indian Embassy in Beijing is working to arrange talks between China’s commerce ministry and representatives from Indian automobile and component manufacturers, although no date has been set.
Automakers have expressed growing concern. Maruti Suzuki, India’s largest carmaker, flagged rare earth supply chain risks as early as April. More recently, Bajaj Auto warned that magnet shortages could “seriously” impact production from July, with executive director Rakesh Sharma describing the outlook as “a dark cloud on the horizon.”
India imported 2,270 metric tons of rare earths in the fiscal year ending March 2024, with China accounting for 65% of the supply, according to government data.
The timing of the supply disruption is particularly problematic, coming amid a sharp slowdown in India’s auto sales growth. After a post-pandemic boom with 27% growth in 2022-2023, car sales growth dropped to just 2.6% in 2024-2025, totaling 4.37 million units, according to automotive researcher JATO Dynamics. Two-wheeler sales also slowed, rising 7.7% compared to the previous year’s 9.3% increase.
“The industry began the year with muted expectations,” said Puneet Gupta, director at S&P Global Mobility for India and Asia. “If the rare earth supply issues persist, it will deepen the challenges.” Gupta warned that rising prices of rare magnets could squeeze profits unless passed on to consumers, risking further dampened demand and extended delivery delays. “In either case, growth will stall—that’s alarming.”
The impact of China’s export restrictions is not limited to India. Nikkei Asia reported this week that Japanese automaker Suzuki has halted production of its Swift compact car due to rare earth supply issues—the first direct effect of Beijing’s controls on a Japanese manufacturer. Similarly, Europe’s automotive suppliers association CLEPA noted that several production lines and plants across the continent have shut down, with only about 25% of export license applications approved since April.
As the rare earth supply crunch persists, Indian automakers and their global peers face mounting uncertainty, highlighting the strategic vulnerabilities in global automotive supply chains tied to China’s dominance in these critical materials.
