China’s Rare Earth Magnet Ban: Threat to India’s auto sector? How analysts view EV space now

China’s Rare Earth Magnet Ban: As neighbor country's dominant decision to ban the export of rare earth magnets for various countries, including India and the US, the action create threats for India’s auto sector, especially and electric vehicle (EV) industry. With over 80 per cent of the nation's rare earth magnet supply coming from China how this move is expected to cause immediate disruptions in production and rising costs. Know what analysts said.

"Indian EV makers, particularly in the two-wheeler segment, are facing serious short-term challenges. Inventories could run out within weeks, and with limited alternative sources, companies may be forced to raise prices or cut production." according to Ajit Mishra of Religare Broking.

SimranJeet Singh Bhatia of Almondz Global Securities has highlighted that companies like Exide Industries which have invested heavily in EV battery manufacturing will feel the impact due to supply chain disruptions.

Major automobile firms like Bajaj Auto, Tata Motors, TVS Motors, and Ola Electric will be affected after the ban, Bhatia said, adding that this disruption is not yet reflected in the financials of EV companies.

Bhatia also said that have high debt auto firms like Ola Electric may see further pressure on their margins.

Here is a summary auto sales in May 2025:

• TVS Motors led EV two-wheeler sales: 24,550 units
• Bajaj Auto: 21,770 units
• Ola Electric: 18,550 units

Meanwhile, Atul Karwa of HDFC Securities linked the ban to broader global trade tensions and said that China is using its dominance in rare earths—mining 70 per cent and producing 90 per cent of the world’s magnets—as leverage.

Karwa said that Indian OEMs expect their current stock to last only till this month and rare earth production is capital and energy intensive and it is hard to replace quickly.

“Diplomatic efforts may be needed to speed up approvals from China,” Karwa said.

Any silver lining in long or short term for the sector?

According to Bhatia, this will provide a silver lining for auto firms in the long term and the industry representative has expressed the need to find alternative sources for rare earth magnets.

Why China did this?

In response of US President Donald Trump's high tariffs, China took this action as what HDFC Securities' Karwa indicate.

All you need to know about rare-earth magnets, importance in EV & auto industry

Such kind of magnets made from a group of 17 special metals called rare earth elements. Rare earth magnets are essential for EV motors with each vehicle using up to 1–2 kg of these materials. The most common type is made from neodymium, iron, and boron those are essential for EV motors because they make the motors lighter and enhance vehicles power. It also helps EVs to run faster and makes their batteries last longer and also important parts like gears and drive trains.

What is a drive train?

The drive train system transfers power from the engine or motor to the wheels so the vehicle can move. In EVs, instead of a fuel engine, there's an electric motor powered by a battery.
Rare earth magnets are also used in smartphones, laptops, wind turbines, airplanes, and even missiles.

Such magnets, however, also used in many car parts like motors, brakes, wipers, audio systems, power windows, sensors, speedometers, water pumps, and automatic transmissions.

Why are these magnets so important?

Due to its characters like small in size, lightweight, and work well even at high temperatures.

On the other side, magnets like ferrite or iron-nitride magnets that produce in India are heavier and less powerful. They also produce less torque.