India’s rare earth magnets crisis: What lies ahead for the EV sector?

As China tightens export controls on rare earth magnets, the shockwaves are being felt across global logistics and supply chain management, particularly in the automotive, defense, and consumer electronics sectors. For India’s electric vehicle (EV) ecosystem, the crisis exposes a critical weakness overdependence on Chinese supply chains.

Despite possessing the third-largest reserves of rare earth elements, India has yet to build a self-reliant logistics chain management infrastructure to extract, refine, and manufacture these vital components. Meanwhile, China dominates the market by mining 61% and refining 91% of the global rare earth supply, leaving countries like India vulnerable to supply shocks.

Rare earth magnets are small but vital parts of modern vehicles from ICE vehicles using them in power steering and wipers to EVs relying on them in Permanent Magnet Synchronous Motors. These motors offer high torque, compact design, and energy efficiency essential traits for EVs.

This dependency has severe implications for logistics and supply chain trends in India's automobile industry. Real-time logistics planning is being hampered as manufacturing timelines get pushed, with China reportedly rejecting two India-bound shipments.

Ravi Bhatia, President of JATO Dynamics India, warns that the disruption could lead to manufacturing delays of 2 to 6 months for electric two-wheelers and cars. This delay, combined with logistics and distribution issues, is expected to raise EV prices by 5-8%. For instance, an electric scooter currently priced at ₹1.6 lakh may become more expensive by ₹8,000–13,000.

Notably, logistics planning software and demand forecasting in logistics can only do so much when the raw material supply is cut off. Both EV and ICE vehicles require these magnets, complicating recovery timelines for the entire auto sector.

According to Vikram Handa, MD of Epsilon Carbon Pvt Ltd, setting up rare earth processing infrastructure is no small feat. “It takes 4–5 years to develop the technology and get auto OEM approvals, followed by 2 more years to build the processing plant. The capital requirement is massive, and China still controls the purification tech,” he notes.

Despite having the resources, India has seen minimal private investment in this sector. There is an urgent need to develop best logistics strategies for businesses that are dependent on rare earth materials. Building logistics services, enhancing logistics packaging for sensitive rare earth components, and investing in logistics chain management are crucial next steps.