India is on the road to a cleaner, electric future, but it has hit, quite literally, an unexpected bump in the road. China has tightened regulations on the export of rare-earth magnets, which are small yet powerful elements essential to electric vehicles (EVs) since April 2025. This abrupt shift is posing significant problems for the Indian auto industry, particularly in the production of EVs.
Why Rare-Earth Magnets Matter
Small and cheap rare-earth magnets can be powerful, yet the most important feature of these magnets is that they can boost electric vehicles. Such magnets form the essence of Permanent Magnet Synchronous Motors (PMSMs), most of which are present in EVs. PMSMs assist in providing high engine efficiency and energy, making EVs more relaxed and stable. Even hybrid cars cannot exist without them.
The issue started when China, the provider of most rare-earth magnets in the world, developed new regulations on exportation. Companies now have to obtain licenses and detail how the magnets will be used and go into a protracted process of giving approval which may take more than 45 days. This has hindered the shipments at a very slow rate.
What This Means for India’s EV Industry
India gets about 85% of its rare-earth magnet imports from China. That makes the country’s EV production heavily dependent on Chinese exports. With the new rules in place, Indian companies are already feeling the pressure.
According to experts, at this rate the Indian manufacturers would be out of these important components by mid-July 2025 unless things turn around. This has brought about a serious concern by credit rating agency ICRA owing to the fact that besides motors, these magnets are also required when it comes to other high-performance vehicle systems.
According to Crisil Ratings, if the supply disruption continues beyond two months, 6–7% of India’s EV production for that quarter could be affected. Even a delay of a month could slow down EV launches, reduce output, and put the industry’s growth on pause.
How India is Responding
India isn’t sitting still. The government and industry players are working on short-term and long-term fixes.
Short-term steps include:
- Building up emergency stockpiles of rare-earth magnets
- Looking for new global suppliers
- Increasing local assembly through Production Linked Incentive (PLI) schemes
Diplomatic efforts: India’s Ministry of External Affairs is in contact with Chinese officials to try and ensure a smoother supply flow.
Long-term strategy: India is planning changes to the Mines and Minerals Act to boost rare-earth mining at home. While India has the world’s fifth-largest rare-earth reserves, it could take 3–5 years before these can be fully developed.
Innovation: Scientists at Visvesvaraya National Institute of Technology (VNIT) have created a rare-earth-free motor for EVs that performs just as well and costs 25% less—a promising alternative for the future.
Looking Ahead
The action by China has been branded by Commerce Minister Piyush Goyal as a wake-up call to the rest of the global community. Indian ministers held a meeting on June 18, 2025, to talk about the means to safeguard access of the country to rare-earth materials. HD Kumaraswamy, the Steel and Heavy Industries Minister, said that such measures are essential in ensuring that India becomes self-reliant whenever it comes to EV manufacturing.
It is the need to refresh people with the notion that EVs are clean and green, but the materials that power the EVs are a result of a complex, not-so-clean process. However, through smart planning, diplomacy, and innovation, India can convert this challenge into an opportunity to develop a stronger and self-sufficient EV ecosystem.
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Raja Yadav, the content writer at My Car Wisdom, brings a unique voice and style to our blog. With a knack for storytelling and a keen eye for detail, Raja ensures that every piece of content is informative, engaging, and easy to understand. His focus is on delivering high-quality articles that cater to both novice car owners and seasoned automotive enthusiasts.
