India’s booming automotive industry is now navigating treacherous terrain, as China’s tightening grip on rare earth exports threatens to bring vehicle production lines to a grinding halt. While industry leaders and government officials scramble to contain the fallout, the shadow of Beijing’s strategic export policy looms large, sparking fears that India and the global auto sector may be heading toward a full-blown supply chain crisis.
As per a Nikkei Asia report, Indian automakers are sounding the alarm amid supply shocks triggered by Beijing’s export controls on rare earth minerals and magnets materials essential to modern vehicle components, from power steering and electric seats to EV motors and high-performance braking systems. The restrictions couldn’t have come at a worse time: India’s auto sales growth is already decelerating, and the current disruption is compounding an already fragile market.
Rare earths are critical not only to electric vehicles but also to conventional internal combustion engine vehicles. These elements withstand high temperatures and power key systems like wipers, audio units, and precision electronics. In April, Beijing enforced strict limits on exports of seven major rare earths, exacerbating an already-tense U.S.–China trade war. Despite a supposed diplomatic “truce,” Beijing has kept rare earth export licenses scarce deepening uncertainty across Asia and beyond.
India, which became the fourth-largest vehicle producer globally in 2023, is now feeling the pinch. According to industry insiders, Indian suppliers’ stockpiles of rare earth materials typically maintained at three to six weeks are nearly exhausted. The Chinese licensing process, mired in bureaucratic delays and multilayered approvals, has ground to a halt. As of now, over 20 Indian import requests are still pending with no response from Beijing.
To tackle the growing crisis, the Indian government has escalated the issue to the Prime Minister’s Office. Officials in Delhi are coordinating with their Chinese counterparts, hoping to arrange high-level negotiations between India’s auto manufacturers and China’s commerce ministry. Yet so far, there’s no official timeline for resolution.
The ripple effect across India’s auto industry is already visible. Maruti Suzuki, the country’s top carmaker, flagged rare earth supply risks back in April. More recently, Bajaj Auto warned of serious production delays by July if magnet shortages persist. Rakesh Sharma, an executive at Bajaj, ominously described the situation as a “dark cloud on the horizon.”
According to government data, India imported 2,270 metric tons of rare earths during the fiscal year ending March 2024, with China supplying 65% of the total. This dependency has left the Indian auto sector acutely vulnerable at a time when it’s already coping with a demand slowdown. Car sales, which surged by 27% in 2022–2023 during the post-pandemic boom, slumped to just 2.6% growth in 2024–2025, totaling 4.37 million units. Two-wheeler sales also decelerated, rising 7.7% compared to 9.3% the year before.
“The year began with low expectations,” said Puneet Gupta of S&P Global Mobility. “But if the rare earth crisis continues, we’re looking at deepened losses, squeezed margins, and even factory shutdowns.” He noted that rising raw material prices are likely to hit consumers next, further dampening demand and delaying deliveries across the board.
This isn’t just India’s problem. The effects of China’s export clampdown are reverberating globally. Nikkei Asia reports that Suzuki in Japan has suspended production of its Swift compact car due to rare earth shortages the first major casualty among Japanese automakers. Meanwhile, Europe’s automotive supplier network is also in distress. The industry association CLEPA confirmed that production at multiple plants has ceased, with only 25% of license requests to China approved since April.
As rare earth supplies tighten, it’s becoming clear that China’s dominance in these materials has morphed into a geopolitical lever one that could reshape the global automotive landscape. For India and its peers, the message is stark: diversify supply chains now or risk ceding the future of the auto industry to Beijing’s calculated control.
