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Informist, Tuesday, Jun. 10, 2025

KOLKATA – India's electric vehicle industry may face production delays in the coming months due to supply disruptions arising from export restrictions of rare earth magnets from China, ratings agency Crisil Ratings said Tuesday. Such delays can also negatively impact vehicle launches and weigh on the sector's growth momentum, it added.

According to Crisil Ratings, India sourced over 80% of its 540 tonnes rare earth magnet imports from China in 2024-25 (Apr-Mar). By the end of May, nearly 30 import requests from Indian companies were endorsed by the Indian government but none have yet been approved by the Chinese authorities and no shipments have arrived, the agency said in a statement.

Rare earth magnets are integral to permanent magnet synchronous motors, or PMSM as the industry calls it, used in electric vehicles for high torque, energy efficiency and compact size. Hybrid vehicle variants also depend on such magnets for efficient propulsion. In internal combustion engine vehicles, the use of rare earth magnets is largely limited to electric power steering and other motorised systems.

In April, China – the world's dominant exporter of rare earth magnets – imposed export restrictions on seven rare earth elements and finished magnets, mandating export licences. The revised framework demands detailed end-use disclosures and client declarations, including confirmation that the products will not be used in defence or re-exported to the US.

With the clearance process taking at least 45 days, this added scrutiny has significantly delayed approvals. And the growing backlog has further slowed clearances, tightening global supply chains. Over 90% of rare earth magnet processing is concentrated in China, with limited short-term alternatives.

"Over a dozen new electric models are planned for launch, most built on PMSM platforms," Anuj Sethi, senior director at Crisil Ratings, said in a statement. "While most automakers currently have 4-6 weeks of inventory, prolonged delays could start affecting vehicle production, with electric vehicle models facing deferrals or rescheduling from July 2025."

In FY26, domestic passenger vehicle sales volume is expected to grow 2-4%, while electric passenger vehicles could rise by 35-40%, albeit on a low base. Electric two-wheelers could grow by 27%, and outpace the overall two-wheeler industry growth rate of 8-10%. However, sustained supply tightness could soften this momentum, especially in the electric vehicles segment, Crisil said.

"Automakers are actively engaging with alternative suppliers in countries such as Vietnam, Indonesia, Japan, Australia, and the US, while also optimising existing inventories," Poonam Upadhyay, director at Crisil Ratings, said. "With applications across EVs and ICE vehicles, a prolonged supply squeeze could disrupt production of PVs (passenger vehicles) and 2Ws (two-wheelers), making this low-cost component a potential high-impact bottleneck for the sector."

Recognising the risk, the government and automakers are taking action on two fronts, Crisil said. In the short term, the focus is on building strategic inventories, tapping alternative suppliers and accelerating domestic assembly under the government's production-linked incentive schemes.

For the long term, reducing import dependency will hinge on fast-tracking rare earth magnets exploration, building local production capacity and investing in recycling infrastructure, according to the ratings agency. End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Reported by Avishek Rakshit

Edited by Deepshikha Bhardwaj

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