Highlights
- China controls 90% of global rare earth processing and has imposed export restrictions on critical magnet materials, disrupting India’s key industrial sectors.
- India’s EV and defense industries face potential production shutdowns due to magnet shortages, with most automakers having only 4-6 weeks of inventory.
- The crisis is prompting India to accelerate domestic rare earth exploration, diversify international partnerships, and develop strategic mineral stockpiles.
Beijing’s dominance in rare earth extraction—controlling about 90% of global processing—has turned supply chains into leverage points. In mid-June 2025, Indian Foreign Secretary Vikram Misri (opens in a new tab) met with Chinese Vice Foreign Minister Sun Weidong (opens in a new tab) in New Delhi to address China’s export curbs on key magnet materials, which have disrupted supplies critical to India’s EV, electronics, and defense sectors.
Diplomatic Engagement and Rare Earths
At their June 12–13 meeting, Indian officials raised concerns about restrictions on rare earth magnets. China’s April 2025 export licensing regime on seven elements has created shipment delays, particularly for permanent magnets bound for India. Though India’s Ministry of External Affairs (MEA) didn’t explicitly mention rare earths, it announced that new economic dialogues would address specific issues, suggesting rare earths will remain on the table.
China described the discussions as “candid” and signaled its openness to further engagement, although its public statements avoided specifics. The meeting followed Misri’s January trip to Beijing, part of a broader effort to normalize bilateral ties since the 2020 border clashes.
Mounting Pressure on Auto Manufacturing
More than 80% of India’s rare earth magnets are imported from China. Since April, dozens of Indian shipments have stalled at Chinese ports, awaiting license approvals. As of late May, none of India’s roughly 30 applications had been approved. Indian automakers warned that EV production could stop by June without incoming magnets.
To press for resolution, industry associations Society of Indian Automobile Manufacturers (opens in a new tab) (SIAM) and Automotive Component Manufacturers Association of India (opens in a new tab) (ACMA) organized a delegation of 20 executives to visit Beijing. Backed by India’s Commerce Ministry, the group aimed to urge Chinese counterparts to release shipments. Meanwhile, India’s Ministry of Heavy Industries convened emergency meetings and began drafting incentives for domestic magnet production and relief on equipment imports.
Selective Enforcement?
Indian industry believes Beijing is applying stricter scrutiny to India than to other countries. While manufacturers in Japan and South Korea began receiving licenses, India had seen none. Some applications have reportedly been outright denied.
Geopolitics may play a role. Since 2020, India has restricted Chinese investment and grown closer to the U.S.—moves that may be reflected in China’s licensing behavior. According to Rare Earth Exchanges (REEx) reports, Beijing also bans the export of rare earths for military use or for re-export to the U.S., thereby increasing hurdles for Indian firms tied to defense or Western partners.
Threat to India’s EV Goals
India’s electric vehicle (EV) industry is at a critical juncture. By late May, most automakers had only 4–6 weeks of magnet inventory. With supplies frozen, production shutdowns could begin as early as July. Dozens of new EV model launches may be postponed. Industry forecasts of 35–40% annual growth in EV sales may no longer hold if the magnet shortage persists.
Automakers are scrambling for short-term alternatives: sourcing from Japan or Europe, rationing parts, and lobbying for government assistance to build a buffer stock. Strategically, India is accelerating domestic exploration and magnet manufacturing under its National Critical Mineral Mission. It has also initiated discussions with partners such as Kazakhstan and Australia to diversify its sourcing.
Defense Sector Vulnerabilities
Rare earths power many modern defense systems—from radars and missiles to guidance systems and stealth platforms. China’s export rules now bar materials with military end-use, and have already disrupted U.S. defense contractors. India’s defense firms face similar risks. Even re-exports routed through third countries are complicated by China’s restrictions. India’s domestic rare earth processing is limited and primarily reserved for atomic energy and defense, which makes it insufficient to support broader manufacturing.
Experts suggest that India may need to develop rare earth stockpiles similar to its oil reserves. Without a strategic shift, defense production timelines could be delayed.
Conclusion
The India-China talks underscore how critical minerals have evolved into geopolitical pressure points. While Indian officials express cautious optimism about easing restrictions, the immediate challenge remains unresolved. India’s EV and defense industries are taking urgent steps to diversify supply and increase self-reliance. The rare earth magnet crisis may ultimately catalyze deeper reforms, but the road ahead demands diplomacy, resilience, and rapid industrial adaptation.
Sources: Indian Ministry of External Affairs; Ministry of Foreign Affairs of PRC; Reuters; Bloomberg; Business Standard; Times of India; Mining.com
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