China’s rare earth magnets export curb exposes India’s vulnerabilities

China controls over 90% of global processing capacity for the rare earth magnets, which are crucial not only for automobiles but also for clean energy and home appliances.

New Delhi: China’s restriction on exports of rare earth magnets, which are crucial for the auto sector especially electric vehicles, is a wake-up call and India must act with urgency to ramp up domestic exploration and production of critical materials that are important for the country’s industrial ambitions.

According to industry exporters, the Indian auto sector is facing a potential crisis as they rely heavily on China for rare earth magnets.

“In auto, I would say the concern is more serious than what has come out till now,” Confederation of Indian Industry (CII) President Rajiv Memani said.

China has imposed restrictions on exports of rare earth magnets since April in response to high tariffs announced by US President Donald Trump. China controls over 90 per cent of global processing capacity for the rare earth magnets, which are crucial not only for automobiles but also for clean energy and home appliances.

Industry sources said several auto makers are likely to face production disruption from August if the rare earth magnet shortage issue were not addressed.

The Society of Indian Automobile Manufacturers (SIAM) and the Automotive Component Manufacturers Association of India (ACMA) have called for government intervention. 

The Ministry of External Affairs recently said that the Indian authorities were in touch with their Chinese counterparts to find a solution for the issue. 

Memani underlined that the current crisis could act as a wake-up call for India to reduce its dependence on the China-dominated global supply chain.

“I feel it is a good wakeup call for India, not only for rare earths, but for all those areas, whether it’s APIs, penicillin or other products, where we have critical supplies coming from outside,” he said.

According to Global Trade Research Initiative (GTRI) founder Ajay Srivastava, reverse-engineering of low-to-mid-tech imports, domestic production incentives, and long-term investment in deep-tech manufacturing would help reduce India’s overreliance on its geopolitical rival.

“The window to act is narrow, but the urgency is now unmistakable. China’s actions are no longer just a warning—they are a wake-up call,” Srivastava said.

Nearly 90% of India's imports from China are in the low-to-medium technology range, including products such as textile and agricultural machinery, taps, valves, pumps, compressors, building hardware, moulds, bearings, motors, nuts and bolts, and even stationery.

“These are not beyond India’s technological reach. A strategic and phased approach can help reduce this dependence significantly,” GTRI said in a note.

To reduce dependence on China in high-technology sectors, India would need long-term vision, patient capital, and sustained investment in R&D, infrastructure, and talent. “India must nurture firms that can design and fabricate advanced components, and back them with targeted fiscal and regulatory support,” the GTRI said.

India’s trade deficit with China soared to nearly $100 billion in 2024-25. Chinese firms now supply over 80% of India’s needs in laptops, solar panels, antibiotics, viscose yarn, and lithium-ion batteries.

This exposes India’s vulnerabilities to Chinese economic coercion. This is not the first time China has tried to disrupt India’s industrial ambitions.

Over the past year, Beijing has systematically restricted exports of critical raw materials and engineering support, sending a clear warning to New Delhi as geopolitical tensions and trade realignments intensify.

Since mid-2023, China has imposed curbs on exports of critical minerals such as gallium and germanium—essential for India’s electronics, EV, and defense industries. In late 2024, the restrictions were extended to graphite, dealing a direct blow to India’s clean energy and battery manufacturing sectors.

The pressure mounted further in June 2025, when Chinese battery giant CATL reportedly directed Foxconn to withdraw all Chinese engineers from its manufacturing unit near Chennai.

“China’s message is blunt: India’s industrial growth remains dangerously exposed to Chinese inputs, and any attempt to “de-risk” supply chains will carry short-term pain,” GTRI said.