New Delhi: India must urgently develop a full-scale domestic rare earth magnet ecosystem to reduce its dependency on China, especially in light of the recent export curbs imposed by Beijing, according to a report released on Thursday by CareEdge Ratings.
In April, China introduced strict export controls on seven rare earth elements (REEs) essential for manufacturing high-performance magnets, creating ripples across global supply chains. India, which relies heavily on Chinese imports of these critical materials, is now staring at potential production slowdowns, particularly in the automotive sector. With older inventories gradually depleting, the report warned that electric, hybrid, and internal combustion engine (ICE) vehicle production, particularly higher-end models, may be disrupted from July 2025.
"India’s rare earth element crisis is not merely a supply chain disruption but a strategic wake-up call," said Madhusudhan Goswami, Assistant Director at CareEdge Ratings. “This crisis underscores the perils of over-dependence on a single geopolitical actor for critical inputs."
Although automakers may attempt to shift focus to mid-range or base models that require fewer REE-based components, India’s vulnerability remains. The report noted that China's recent move to temporarily resume REE exports to major US automakers offers some hope that Indian firms might also benefit from easing tensions.
Alongside ongoing diplomatic efforts with China, India is also exploring domestic solutions. These include commercializing rare earth magnet manufacturing technologies currently held by select public-sector enterprises and seeking alternative suppliers from countries like Vietnam, Australia, and the United States. However, these alternative sources presently lack adequate processing capacity to fully meet India’s demand.
In the short term, the report noted, Indian automakers are likely to import fully assembled components and sub-systems directly from China to maintain production continuity. This is seen as a tactical measure while more sustainable sourcing strategies are developed.
Looking ahead, the path to resilience lies in building a self-sufficient rare earth ecosystem. This would involve domestic exploration of REE deposits, incentivizing private sector participation, promoting R&D into REE alternatives, and establishing long-term international collaborations. Goswami stressed that creating strategic reserves and aligning public-private research with global partnerships must all converge into a unified national strategy to safeguard India’s industrial future.