China's rare earth curbs: Can India's EV ambitions withstand supply risks?

China's recent decision to tighten export controls on rare earth elements has sent shockwaves through global supply chains, particularly for the electric vehicle (EV) industry. As the world's largest producer of these critical minerals, Beijing's move to restrict shipments of key materials like neodymium, dysprosium, and praseodymium threatens to disrupt manufacturing of EV motors, batteries, and other essential components. For India, which has set ambitious targets to achieve 30% EV penetration by 2030 under the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme, the timing could not be worse. The country currently imports nearly 60% of its rare earth needs from China, making its EV ambitions highly vulnerable to supply shocks.

India's EV ecosystem relies heavily on rare earth permanent magnets—specifically neodymium-iron-boron (NdFeB) magnets—used in traction motors for electric cars, scooters, and buses. Without a stable supply of these magnets, domestic manufacturers like Tata Motors, Mahindra & Mahindra, and Ola Electric could face production delays and rising costs. A recent report by the Indian Rare Earths Limited (IREL) warns that a complete halt in Chinese exports could stall over 40% of planned EV capacity by 2027. To mitigate this, the government has announced a ₹4,000 crore scheme to develop a domestic rare earth processing hub in Andhra Pradesh, aiming to reduce import dependence by 25% over five years. Yet, experts argue that building end-to-end processing capabilities—from mining to magnet manufacturing—will take at least 7–10 years, leaving a critical gap in the short term.

“Rare earths are the unsung heroes of the EV revolution. Without them, India's electric dream risks running on empty. The supply chain is too concentrated, and we need immediate diversification,” said Dr. Rajesh Kumar, a materials scientist at IIT Bombay, in a recent interview with Business Standard.

Meanwhile, the global scramble for alternative sources has intensified. Countries like Australia, the United States, and Vietnam are ramping up rare earth production, but refining capacity remains concentrated in China. India has signed preliminary agreements with Australia's Lynas Rare Earths and the US Department of Energy to collaborate on processing technologies. However, these partnerships are still in early stages and unlikely to yield meaningful volumes before 2028. The table below outlines the key rare earth elements critical for EVs, their primary uses, and current supply risks for India.

Beyond raw materials, India must also address the lack of domestic magnet manufacturing. Currently, only a handful of companies like NMDC and Kineco Group produce NdFeB magnets, and their output meets less than 10% of domestic demand. The government's Production Linked Incentive (PLI) scheme for advanced chemistry cell (ACC) batteries has attracted investments worth ₹50,000 crore, but it does not cover magnet production. Industry bodies have urged the Ministry of Heavy Industries to extend PLI to rare earth magnets, arguing that without this, India's EV cost advantage could erode by 15–20%. As China tightens its grip, India's ability to pivot quickly will determine whether its EV ambitions survive or stall. For the latest updates on this evolving story, visit autoverse.cc.