Highlights

• Toyota is actively diversifying rare earth sourcing through global partnerships in India, Angola, and beyond to reduce dependency on China.
• The company is developing innovative magnet technologies and recycling strategies to minimize rare earth demand and supply chain vulnerabilities.
• India's shift from a raw material supplier to a strategic partner is reshaping the global rare earth supply landscape, with implications for international technology and manufacturing.

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Rare earth elements such as neodymium and dysprosium are essential for the high-performance magnets in EV and hybrid motors. For Toyota, a pioneer in both, this dependency has long been a strategic vulnerability, given China’s dominance in mining and magnet production. China’s export curbs in 2010 and its more recent restrictions in 2023–2024 underscored the risk, prompting Toyota to diversify sourcing, reduce rare earth use, and invest in recycling.

Alternate Sourcing: India and Beyond

After the 2010crisis, Toyota’s trading arm, Toyota Tsusho, struck a landmark deal in India. In 2012, a bilateral agreement enabled Toyota to establish Toyotsu Rare Earths India, an advanced processing plant in Andhra Pradesh that extracts oxides from monazite sands. By 2013, the facility was shipping refined material to Japan, and by 2024 had exported over 1,000 tonnes, equal to about one-third of India’s total output.

Toyota Tsusho also looked elsewhere. A Vietnam project was abandoned in 2013 after China slashed prices. More recently, in 2025, it signed a non-binding MOU (opens in a new tab) with UK-based Pensana to secure up to 20,000 tonnes per year of rare earth carbonate from Angola’s Longonjo mine, with plans to process it through its Indian refinery. This Angola–India–Japan corridor could help Toyota cushion future disruptions.

Tech Innovation to Ease Demand

Toyota has also worked to cut demand pressures. It developed a magnet that eliminates terbium and dysprosium and reduces neodymium content by 20–50% by substituting lanthanum and cerium. Deployment is expected in the mid-2020s which of course is upon us. Toyota was also an early mover in recycling, establishing in 2012 the first system to recover neodymium and dysprosium from used hybrid motors—creating a small but meaningful closed-loop source.

Government Backing

These efforts align with Japan’s national strategy to secure critical minerals. The India partnership itself stemmed from Tokyo–New Delhi diplomacy. Agencies such as Japan Organization for Metals and Energy Security (opens in a new tab) (JOGMEC) and Ministry of Economy, Trade and Industry (opens in a new tab) (METI) have backed projects like Lynas in Australia and funded strategic stockpiles. Toyota’s Pensana agreement dovetails with these diversification efforts. Meanwhile, U.S. policy now supports allies with subsidies and even price guarantees to encourage non-Chinese supply, reducing economic risk for companies like Toyota.

India’s Shift: From Supplier to Partner

For years, Toyota’s partnership with state-owned IREL (opens in a new tab) was mutually beneficial: India sold rare earth chloride, Toyota provided processing technology and a guaranteed buyer outside China. But in June 2025, India halted rare earth exports to Japan, effectively suspending the 13-year arrangement. Commerce Minister Piyush Goyal (opens in a new tab) ordered IREL to conserve supply for domestic use, especially neodymium needed for EVs and wind turbines.

The move is part of India’s bid to build a full “mines-to-magnets” supply chain, ending reliance on exports of raw materials. India banned exports of unprocessed rare earths in 2023 and launched a National Critical Minerals Mission in 2025 (opens in a new tab), budgeting nearly $2 billion for exploration, refining, and recycling. Prime Minister Modi has criticized sending ore abroad only to buy back value-added products.

The Toyota Dilemma

For Toyota, the halt removes a supply stream once equal to a third of India’s output. Toyotsu Rare Earths India now faces uncertainty as India stockpiles or diverts production to the domestic industry. Yet opportunity exists. IREL has approached Toyota about helping build India’s magnet industry. Talks include the possibility of Toyota brokering a Japanese magnet manufacturer’s entry into India. Another option floated: IREL supplying oxide to a foreign partner who would make magnets abroad and re-import them to India as a stopgap. These are early discussions, but if realized, they would shift Toyota from an export conduit to a local partner, keeping it inside India’s ecosystem while aligning with New Delhi’s value-addition push.

A Global Realignment

Toyota’s maneuvering mirrors a wider reorientation of rare earth supply chains. Japan treats rare earth security as economic security, funding projects across Asia and Africa. India is asserting itself as a future hub, even if it means short-term export sacrifices. The U.S. and Europe are investing heavily in processing, recycling, and price supports to reduce exposure to China.

Challenges remain. India still lacks large-scale facilities to produce separated oxides or magnet alloys, midstream steps that take years to establish. Toyota’s Odisha refinery was a milestone, but India still imports most finished magnets. Bridging this gap will require incentives, permits, and foreign know-how. Collaborations with Japanese or Korean firms may accelerate progress.

Implications for the West

For Toyota, resilience means staying globally engaged. The Angola–India–Japan corridor is one example; partnerships with Lynas or future Indian ventures are others. Ongoing magnet innovation and recycling will further reduce exposure.

Other sources in the Rare Earth Exchanges network (opens in a new tab) suggest other discussions unfolding between Japan and India.

For the West, Toyota’s diversification helps stabilize the magnet market. But India’s domestic-first policy underscores the reality that every nation prioritizes its own supply. In time, a self-sufficient India could become a net magnet producer, benefitting allies. In the short run, however, restrictions tighten the market for all non-Chinese buyers.

Conclusion

Toyota’s rare earth journey in India highlights the shifting ground of global supply chains. What began as a straightforward offtake deal has become a complex negotiation: supporting India’s ambitions while safeguarding Japan’s needs. Toyota is hedging its bets—sourcing globally, innovating in technology, and adapting to host-country demands. The rare earth chain is fragmenting, and Toyota is positioning itself to emerge as a winner in this new order.

Sources: Reuters; CSIS; Rare Earth Exchanges; RawMaterials.net; Toyota Global; StrategicMetalsInvest.com.

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