Highlights
- China’s export restrictions on rare earth elements are causing widespread disruptions in the global automotive manufacturing sector.
- Production lines are shutting down across Europe and Japan.
- CLEPA reports that only 25% of export license applications have been approved.
- This creates significant supply chain challenges for automotive and technology industries.
- Automotive manufacturers are scrambling to find alternative materials.
- There is a focus on reducing dependency on Chinese rare earth supplies to mitigate potential long-term production risks.
The European automotive industry is sounding the alarm over mounting disruptions caused by China’s recent restrictions on the export of rare earth elements and magnets, critical components in both electric and combustion engine vehicles. According to a June 4 press release (opens in a new tab) from the European Association of Automotive Suppliers(CLEPA), these export controls have already forced several production lines and plants in Europe to shut down, with more expected to follow as inventories dwindle.
CLEPA, which represents more than 3,000 automotive supply companies across Europe, emphasized the urgency of restoring a predictable and transparent trade environment. The group warned that China’s licensing system for rare earth exports has become opaque and inconsistent, with some export applications denied over minor procedural issues and others reportedly requiring the disclosure of sensitive intellectual property.
“China’s export restrictions are already shutting down production in Europe’s supplier sector,” said CLEPA Secretary General Benjamin Krieger. “We urgently call on both the EU and Chinese authorities to engage in a constructive dialogue to ensure the licensing process is transparent, proportionate, and aligned with international norms.”
The export curbs were introduced by China’s Ministry of Commerce in early April, reportedly in response to new tariffs imposed by former U.S. President Donald Trump. These measures targeted rare earth materials used not only in the automotive sector but also in defense and clean energy. With China controlling about 60% of the global supply of rare earths, the move has triggered global concerns about the fragility of critical supply chains.
According to a June 5 article (opens in a new tab) from CNBC, only about 25% of the hundreds of export license applications submitted to Chinese authorities have been approved. Even when licenses are granted, the process of customs clearance has been slow, creating additional delays in already stressed supply lines.
German auto leaders have echoed CLEPA’s concerns. Hildegard Müller, president of Germany’s powerful automotive industry lobby VDA, told CNBC that the Chinese restrictions are threatening not only the stability of automotive production but also the broader security of supply across multiple industries. “If the situation does not change quickly, production delays and even production stoppages can no longer be ruled out,” Müller warned, calling on European policymakers to address the issue directly with Beijing.
Among carmakers, the impact has been uneven. BMW reportedly said some suppliers had been affected by the Chinese curbs, while Volkswagen and Mercedes-Benz have so far reported stable supply conditions. However, both companies have stated they are taking steps to reduce dependency on rare earth elements. A Mercedes-Benz spokesperson told CNBC that the automaker is actively pursuing new material compositions that avoid heavy rare earth metals like dysprosium in its electric drive systems.
Japan’s automotive sector is also feeling the strain. Nissan’s CEO Ivan Espinosa acknowledged that the situation is unfolding in real time and confirmed it would affect the company’s operations. “We need to continue finding alternatives for the future, keeping flexibility and keeping our options open,” he said. Meanwhile, Suzuki Motor has reportedly suspended production of its Swift model due to the global shortage of rare earth elements.
Back in Europe, CLEPA warned that while long-term efforts to diversify sources and develop rare earth-free technologies are essential, they offer no immediate relief. The organization cautioned that the current disruptions threaten thousands of jobs and could accelerate an industrial pivot that undermines long-standing supply relationships.
With tensions escalating and no short-term fixes in sight, industry voices across continents are urging urgent diplomatic intervention. As CLEPA noted, Chinese suppliers depend on European buyers just as much as Europe depends on China’s materials. Without swift, coordinated action to stabilize the situation, both sides risk deepening fractures in a global supply chain already under considerable strain.
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