The Indian automotive industry has shown significant signs of growth over the last 3-5 years. Yet, the entire industry could come to a grinding halt all of a sudden very soon. Earlier last month, China issued export restrictions on rare earth magnets which could severely impact vehicle production all across the globe.
“Starting end May or early June, auto industry production is expected to come to a grinding halt,” SIAM said in the document, which was presented during a May 19 meeting attended by executives from Maruti Suzuki, Mahindra & Mahindra and Tata Motors. These sentiments were recently echoed by Rajiv Bajaj, Managing Director, Bajaj Auto in an interview with an online publication.
Now, market analyst Sandip Sabharwal has shared his opinion on this matter. Through his X accounts, Sabharwal says, “The value of Rare Earth Magnets that are imported from China and are a critical part of EV’s and an important part of ICE Automobiles is just around Rs 350 crores.”
However, he pointed out that given China constitutes 90% of the supply of rear earth magnets, if the issue of imports from China is not resolved it can bring the entire industry to a standstill by July end just before the festival season. His statements indicate the gravity of the situation impending ahead and the extent to which the Indian auto industry will be negatively affected.
Strained Indo-China relations to impact policies
According to Reuters, China has cleared exports from some magnet producers, including Volkswagen, opening new tab suppliers. However, OEMs fear strained relations between the two countries could hurt India’s chances of getting quick approvals. The Chinese embassy in New Delhi told Reuters that it was “actively facilitating and streamlining compliant trade” in accordance with legal and regulatory requirements.
Rare earth magnets play a vital role in electric vehicle motors, but they are also essential for components in conventional cars, such as power windows and audio speakers. Although Beijing’s restrictions are intended to target high-performance exports, confusion over the implementation has led to delays in shipments of lower-grade magnets at ports.
According to customs data, China’s exports of permanent magnets dropped 51% year over year in April — the first month reflecting the impact of the new measures — totaling 2,626 tons. Meanwhile, India’s auto industry, which imported 460 tons of rare earth magnets (primarily from China) in the fiscal year ending March 31, is projected to import 700 tons worth $30 million this year, industry estimates show.
