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Informist, Friday, Jun. 20, 2025

MUMBAI – Unless an alternative is found to tackle China's restrictions on the export of rare earth elements, stock prices of two-wheeler makers which have significant electric vehicle portfolios are likely to come under selling pressure in the coming weeks, analysts have said. Reports suggest China's exports of rare earth elements halved on month in May, nearly dropping to levels last seen in February 2020.

"Some Indian two-wheeler makers have a limited stock (of rare-earth magnets, lasting only) till the first or second week of July," a senior analyst at a domestic broking firm said. The analyst said there is "no visible impact" on the ground yet for manufacturers of electric passenger vehicles, and there would be no major impact on the stock prices of Mahindra & Mahindra or Tata Motors for now.

The analyst expects Bajaj Auto, Hero MotoCorp, Eicher Motors, and TVS Motor Co. to fall at least 5% in the near term. Ola Electric Mobility and Ather Energy will also see their stock prices fall, the analyst said. Others said the valuations of two-wheeler makers are "not fair" and may have limited upside in the near term.

Though India also has deposits of rare earth elements, their exploration is still in an early stage, according to media reports citing industry experts. Hence, India is also looking for alternatives and reaching out to countries like Australia, Argentina, Brazil, and Chile to hedge against supply chain risks, the reports said. China dominates exports of rare-earth magnets, producing around 60% and processing about 90% of the global supply.

China exported only 1,238 tonnes of rare-earth permanent magnets in May, down nearly 53% from April, Reuters reported citing data from China's General Administration of Customs. So far, no Indian automobile component manufacturer or original equipment manufacturer has got the nod from Chinese authorities to import the magnets, reports quoting government officials said.

Analysts see this as a risk to production in the coming months if the issue is not resolved, affecting the earnings of these companies. However, some analysts are hopeful that India's government would work to protect domestic automobile companies. Maruti Suzuki India Chairman R.C. Bhargava said in an interview with Business Standard that the company has stock of essential rare earths only till the end of July and is looking for alternatives. The company has announced that it will reduce the production schedule of its maiden electric car e-Vitara. It has also cut its production target by two-thirds for Apr-Sept while maintaining its target of 67,000 units for the year.   

Friday, the Nifty Auto index closed higher at 23679.35 points. The index closed 1.5% higher on a week-on-week basis. M&M and Eicher Motors were the top gainers in the sectoral index. Tata Motors and Apollo Tyres fell the most during the week among the nine stocks that closed in the red. Jatin Gedia, technical analyst at Mirae Asset Sharekhan, expects the Nifty Auto index to find support at 23100 points and face resistance at 24200 points.

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Following are the resistance and support levels for key stocks in the automobile sector for next week as per calculations based on their prices on the National Stock Exchange:

End

Reported by Gopika Balasubramanium

Edited by Rajeev Pai

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