Suzuki Swift Production Halted Amid Global Rare Earth Crisis
As the global auto industry navigates the rare earth crisis, India is poised to take a crucial step towards building a more flexible and domestic supply chain by opening a rare earth mining and processing sector for private players and technical partners, which could help mitigate the impact of the crisis on the country's auto and EV industries.
The global auto industry is facing a significant challenge due to China's restrictions on rare earth exports, with several European auto parts plants suspending output and Mercedes-Benz considering ways to protect against shortages. India's electric vehicle and auto industries are also facing a potential supply chain crisis due to China's export curb on rare earth magnets.
China produces around 90% of the world's rare earths, and its export controls are affecting automakers, aerospace manufacturers, and semiconductor companies. The EU is seeking to clarify the situation and reduce its dependency on China for critical minerals. Several production lines have shut down due to supply shortages, and only a quarter of requests for export licenses have been granted since early April.
The situation is reminiscent of the computer-chip shortage during the Covid-19 pandemic, which wiped out millions of vehicles from automakers' production plans. India imported 460 tons of rare earth magnets in FY24, almost all from China, and plans to import 700 tons this year. The current rare earth crisis can feel like a shock for India's auto and EV industries, but it's also a wake-up call for India to take charge of its future in clean energy and high-tech manufacturing.
The Indian government has just one major player in the rare earth space, IREL (India) Limited, a public sector undertaking under the Department of Atomic Energy. However, the scale and scope of IREL alone are no longer enough to meet the surging demand driven by clean energy, electric mobility, and strategic technologies. Several listed players in the rare earth or critical mineral value chain could benefit from the shift, including NALCO and Vedanta.
The long-term outlook for EV adoption in India remains positive, but near-term turbulence could slow down expansion, particularly in price-sensitive segments. Indian auto stocks are beginning to reflect growing investor concern over the rare earth supply crisis. Leading electric two-wheeler manufacturers, such as Bajaj Auto and TVS Motor, are already feeling the pressure.