India’s Rare Earth Magnet Crisis: Breaking Free from China’s Grip

Rare earth magnets, made from elements like neodymium and dysprosium, are vital for India’s electric vehicle (EV), automotive, renewable energy, and defence industries due to their unmatched strength. Yet, India’s near-total reliance on China, which controls 90% of global magnet production, has exposed vulnerabilities. These curbs threaten India’s manufacturing and highlight the urgency of achieving self-reliance.

This article explores India’s dependency, China’s strategic leverage, and the nation’s efforts to build an independent rare earth ecosystem.

India’s Dependency on China

India imports nearly all its rare earth magnets—460 tons in 2024, projected to hit 700 tons in 2025—from China. These magnets power EV motors, costing ₹8,000-15,000 per electric two-wheeler, and are critical for power steering and defence systems. China’s dominance in mining (70% of global supply) and refining (90%) creates a choke point. Recent export curbs have disrupted Indian automakers like Bajaj Auto and TVS Motor, with production halts looming by mid-2025. The number of firms seeking import licenses doubled from 11 to 21 in two weeks, with over 40 applications still pending, signaling a deepening crisis.

China’s Strategic Leverage

China’s export restrictions on seven rare earths and magnets, imposed on April 4, 2025, stem from geopolitical and economic motives. Triggered by U.S. tariffs on Chinese goods, the curbs require exporters to secure licenses and provide end-user details, disrupting global supply chains. The restrictions target all nations, not just India, affecting the U.S., Japan, and Germany, though enforcement varies. While some U.S. and European firms received licenses, Indian consignments face delays, possibly due to strained bilateral ties.The curbs retaliate against U.S. trade policies, preserve China’s 90% magnet market control, and inflate global prices while keeping domestic costs low. In 2010, China halted exports to Japan, spiking prices, and the 2025 restrictions signal similar intent, disrupting U.S. defense and automotive sectors. India’s EV industry faces 5-8% price hikes, potentially raising electric scooter costs by ₹8,000-13,000. The global scope, with U.S. factory closures and German production risks, underscores China’s leverage, amplified by its ban on exporting REE processing technology.

India’s Response: A Multi-Pronged Strategy

India is countering this dependency with a multi-faceted approach, leveraging its 6.9 million tons of rare earth reserves, the world’s third-largest.

1. Domestic Production: The government is launching a ₹3,500-5,000 crore scheme to subsidize magnet production. Sona Comstar aims for 500-tonne capacity by late 2025, powering over a million EV motors, while Midwest targets 5,000 tonnes by 2026. Indian Rare Earths Ltd’s Visakhapatnam plant produces 3,000 kg annually, a small but growing step.
2. Recycling: Recycling offers a faster path than mining. Attero plans to invest ₹100 crore to recycle 30,000 tons of rare earths yearly, potentially meeting 80-90% of India’s magnet demand using e-waste.
3. International Partnerships: India is diversifying supply through deals with Japan, Kazakhstan, and Australia. Japan, reliant on China for 60% of its rare earths, collaborates with Indian firms like Panasonic. Kazakhstan’s reserves offer further potential via joint ventures.
4. Policy Reforms: The National Critical Mineral Mission and amendments to mining laws aim to boost exploration and private investment. Khanij Bidesh India Ltd facilitates global partnerships, while reduced royalties attract investors.

Challenges Ahead

Building a domestic rare earth ecosystem is daunting. Processing REEs requires advanced technology, and scaling to match China’s cost efficiency could take a decade. Indian Rare Earths Ltd’s monopoly on monazite mining limits private players, and geopolitical tensions with China complicate import resolutions. Alternative suppliers like Australia are still developing, leaving India vulnerable in the short term.

Conclusion

China’s export restrictions expose India’s precarious reliance on rare earth magnets, threatening its EV and defense ambitions. While the curbs target global markets, India’s delays highlight its unique challenges. By ramping up domestic production, recycling, partnerships, and policy reforms, India is striving for self-reliance. Yet, technical hurdles and geopolitical complexities demand sustained effort. As Commerce Minister Piyush Goyal noted, China’s actions are a wake-up call. With resolve and innovation, India can transform its reserves into a pillar of economic and strategic autonomy, but the path requires urgent action.