A China move could leave Indian car production dead in its tracks, ET Auto

<p>Industry insiders had warned that a production stoppage remained imminent with the curbs by Chna. </p>
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India’s auto manufacturing faced a severe threat from China’s sudden export restrictions on rare earth magnets, putting the country’s car production at risk of coming to a complete halt within days, according to company executives and industry documents seen by Reuters. These magnets are vital components used not only in electric vehicle motors but also in everyday car parts like power windows and audio systems.

However, ET had reported citing sources that imports of permanent magnets used in cars and other electronics from China have likely resumed after India began issuing certificates assuring compliance with China’s export curbs. Officials said the Directorate General of Foreign Trade (DGFT) has issued around 30 certificates, one for each consignment, confirming that these permanent magnets would not be used for defence applications nor re-exported to the United States.

Industry insiders had warned that a production stoppage remained imminent with the curbs by Chna. Reuters reported, citing company executives and documents from industry groups, that inventories of rare earth magnets held by auto part makers were expected to run out by the end of May. The Society of Indian Automobile Manufacturers (SIAM) urged the government to intervene and lobby Beijing to ease restrictions, warning of a looming crisis in the world’s third-largest car market.

China controls more than 90% of the global processing capacity for these magnets, which are essential not only for electric vehicle motors but also for traditional car components like power windows and audio speakers. Beijing introduced the export restrictions in April as a response to U.S. President Donald Trump’s tariffs, requiring companies to obtain import permits from Chinese authorities. While the curbs primarily target high-performance magnets, shipments of low-end magnets have also been held up amid confusion over how the new rules should be implemented.

In a meeting with commerce ministry officials on May 19, SIAM presented an internal document stating, “Starting end May or early June, auto industry production is expected to come to a grinding halt.” The meeting included executives from Maruti SuzukiMahindra & Mahindra, and Tata Motors.

Though some Chinese magnet producers, including suppliers to Volkswagen, have had their exports cleared, three auto industry executives told Reuters they fear that strained India-China relations could delay approvals, worsening the supply bottleneck. These executives requested anonymity due to the sensitivity of the issue.

When asked about the export restrictions’ impact on India, China’s embassy in New Delhi said it was “actively facilitating and streamlining compliant trade” according to legal and regulatory requirements. The embassy added, “China’s lawful imposition of export controls on these items aims to better safeguard national security and interests.”

Requests for comment sent to Mahindra, Maruti, TataSIAM, the Indian commerce and external affairs ministries, and the Auto Component Manufacturers Association of India (ACMA) went unanswered.

The import process for these magnets is complex, requiring approval from Indian ministries and the submission of “end-use certificates” to prove the magnets will not be used for military purposes. These documents must be verified by the Chinese embassy in New Delhi and forwarded to the Chinese suppliers, after which Beijing issues the export licence. The SIAM document said India should approve import applications “within hours” and pressure Chinese authorities to expedite licences “on an urgent basis.”

China’s exports of permanent magnets fell 51% year on year to 2,626 tons in April, the first month data was available after the export curbs took effect, according to customs figures.

India imported 460 tons of rare earth magnets, mostly from China, in the fiscal year ending March 31 and expects to bring in 700 tons valued at $30 million this year, according to industry estimates.

SIAM and ACMA warned in a separate document submitted to the Indian government, “Though the cost of imported rare earth magnets is minuscule in vehicles, risk is vehicles cannot be manufactured even if we are short of one component.”