Hey there, auto enthusiasts! Buckle up because we’ve got some news that might just send chills down the spine of the Indian automobile industry. A report from Emkay Research is saying that China’s latest move to tighten export controls on rare earth elements (REEs) could lead to some serious disruptions.
Now, you might be wondering what these REEs have to do with your favorite vehicles. Well, these elements are critical for making the chips that keep everything running smoothly. And guess what? China produces more than 70 percent of the world’s REEs and dominates over 90 percent of refining capacity. So, it’s a big deal when they decide to impose stricter export regulations.
Starting April 2025, China is stepping up its game for these exports, citing reasons linked to national security and non-proliferation. That means longer licensing times, which could create a ripple effect of supply uncertainties across multiple sectors, especially in auto manufacturing. Right now, both electric passenger vehicles (E-PVs) and internal combustion engine passenger vehicles (ICE-PVs) are feeling the heat.
The report points out that electric vehicles (EVs), passenger vehicles (PVs), two-wheelers (2Ws), and commercial vehicles (CVs) might see the biggest impact. Why? Because the high-performance motors in EVs need heavy rare earth elements, like dysprosium and terbium, to stay efficient at high temperatures.
Let’s break down the cost: the magnets in the motors of electric two-wheelers (E-2Ws) can cost around Rs 150, whereas for passenger vehicles, they can range from Rs 2,000 to an eye-watering Rs 24,000, depending on features. Now, it’s not just about the price tag; it’s about having these components available in the first place. The limited alternatives for sourcing are a major concern.
While ICE two-wheelers (2Ws) and three-wheelers (3Ws) might not be as heavily affected immediately, E-2Ws, which use permanent magnet synchronous motors, could face challenges due to design limitations. The report notes that while E-2Ws might manage some design tweaks in a matter of two to three months, passenger vehicles and buses could take six to twelve months for complete redesigns. Yikes!
According to the Society of Indian Automobile Manufacturers (SIAM), production cuts for ICE-PVs could start as early as July 2025. Plus, existing inventories of E-2Ws might only last another month or so unless alternative sourcing solutions are found.
Other countries like Brazil and Australia have significant REE reserves, with Brazil holding 20 percent of the world’s total. But hold on; China isn’t just sitting back. They’ve got skin in the game with stakes in Brazilian mines. Even Vietnam and Malaysia, which have some refining capabilities, are still dependent on China for primary raw materials.
So, what does all this mean? The tightening of export controls is likely to create quite a ruckus in the global supply chain. The Indian auto sector better gear up for a tough ride ahead. Stay tuned, because this story is far from over!