Highlights

• Advanced Electric Machines warns the UK automotive industry is “sleepwalking” into a rare earth supply crisis, with China controlling 85–90% of global separation and nearly all heavy rare earth refining capacity.
• While permanent magnet motors dominate EV platforms for efficiency, AEM positions magnet-free switched reluctance technology as supply chain insurance and domestic manufacturing leverage.
• True resilience requires the West to scale separation capacity, expand heavy rare earth refining, invest in magnet recycling, and encourage motor technology diversification rather than elimination.

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Advanced Electric Machines’ (opens in a new tab) new white paper (opens in a new tab), The Rare Earth Contagion, argues that the UK automotive sector is “sleepwalking” into a rare earth supply crisis. The central claim is simple: EV motors rely heavily on neodymium, dysprosium, and terbium, and China dominates processing. If exports tighten, production halts.

That core premise is factually grounded. China controls roughly 85–90% of global rare-earth separation and nearly all heavy rare-earth refining. Recent export licensing measures did disrupt magnet flows in 2025. Europe felt it.

Supply concentration is real. That is not alarmism.

Where the Case Holds

AEM is correct on several structural points:

• Permanent magnet motors commonly use NdFeB magnets.
• Heavy rare earths (Dy, Tb) remain highly concentrated in Chinese refining streams.
• Automotive OEMs operate lean, just-in-time inventory models.
• Rare earth price volatility historically exceeded 300% during the 2010–2011 crisis.

The supply chain fragility comparison to semiconductors is strategically compelling. Investors should not dismiss it.

Where the Framing Sharpens

However, the white paper blends risk analysis with commercial positioning. Global rare earth production today exceeds 300,000 tonnes annually. EV demand is rising, but rare earths are used in wind turbines, defense systems, robotics, consumer electronics, and industrial motors. The constraint is not geological scarcity. It is refining capacity, heavy rare earth separation, and magnet manufacturing scale.

AEM presents magnet-free switched reluctance technology as a near-term substitute with lower lifecycle impact

That may be true in certain duty cycles (buses, rail). But permanent-magnet motors still dominate passenger EV platforms due to their torque density and efficiency at scale. OEM transition timelines are measured in platform cycles, not white paper urgency.

The Environmental Narrative: Partial but Powerful

The paper emphasizes radioactive waste and acid gas generation in rare earth mining. Environmental externalities are real, particularly in legacy Chinese operations. Yet modern projects in Australia, the U.S., and Africa operate under tighter standards. The narrative risks flattening distinctions across jurisdictions.

Lifecycle claims commissioned internally deserve a third-party peer review before policy adoption.

What This Really Signals

This is not anti-rare-earth rhetoric. It is a competitive strategy.

AEM is positioning magnet-free motors as:

• Supply chain insurance
• Industrial policy alignment
• Domestic manufacturing leverage

From a Rare Earth Exchanges™ perspective, the bigger question is not elimination versus dependence. It is a portfolio strategy.

The West must:

• Scale separation capacity
• Expand heavy rare earth refining
• Invest in magnet recycling
• Encourage motor technology diversification

Rare earth independence is unlikely. Rare earth resilience is achievable, albeit it will take several years.

Investors should see this white paper not as a death knell for magnets, but as confirmation: rare earths remain strategic, indispensable, and politically charged.

And when industries argue about eliminating them, that alone proves their importance.

Profile

Advanced Electric Machines (AEM) (opens in a new tab), founded in 2017 as a Newcastle University spin-out, designs and manufactures sustainable, high-performance electric motors that are 100% free from rare earth magnets and, in some designs, copper. Based in Washington, England, AEM focuses on recyclable, cost-effective traction motors for automotive, commercial, and aerospace industries.