Restrictions on the import of Chinese rare earth elements has the auto industry feeling handicapped and asking for government support in expediting approvals of export licenses from the Chinese government.
China’s authorities had mandated special export licenses for seven rare earth elements and related magnets, with effect from April 4.
As per the industry sources, various domestic suppliers have already sought approval from the Chinese government through their local vendors in China, but no approvals have been granted so far.
China accounts for around 90 per cent of the overall supply for rare earth magnets that are used across multiple sectors including automobiles, clean energy, home appliances, and multiple applications in EVs (Electric Vehicles) – such as electric motors, regenerative braking systems, power steering etc.
In Japan, Suzuki Motor has already suspended production of its Swift car because of China’s curbs. Last week, Maruti Suzuki India Senior Executive Officer (Corporate Affairs) Rahul Bharti said China has asked for an end-user certificate, endorsed by the Indian government and approved by the Chinese government. “So that process is on and industry is in discussion with the government,” he stated.
Deloitte India Partner and Automotive Sector Leader Rajat Mahajan noted that the shortage is a major supply chain disruption, especially for EVs as rare earth metals are used extensively in the electric motor which is a core component.
Rare earth magnets have high magnetic energy storage capacity with low coercivity at high operating temperatures.
While OEMs (Original Equipment Manufacturers) are evaluating options to reduce dependence on the supply of rare earth magnets, finding immediate alternatives is going to be challenging.
The critical alternate materials include samarium, gadolinium, terbium, dysprosium and lutetium, which are essential in electric motors, braking systems, smartphones and missile technology. Although research and development on other magnetic materials in ongoing, there has not been large-scale commercial usage of these in applications like EV.
Also, there are not enough rare earth magnets to recycle at this point in time to satisfy the EV volumes, Mahajan said. It will not be easy for OEMs to suddenly change course on powertrain as well as on alternate material.
He hopes the situation will get resolved via diplomatic channels. “But if it continues, then we may see a shift towards powertrains for large OEMs,” he added.
“The implications could include inflationary pressures (led by higher cost for rare earth magnets against the backdrop of shortage) or even disruption in production schedules in absence of a seamless supply of the same,” noted Srikumar Krishnamurthy, Icra Senior Vice President & Co-Group Head Corporate Ratings on the effects on the EV industry if curbs on export continue.
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