Highlights

• Bajaj Auto experiences a 50% production drop due to heavy rare earth magnet shortages from China.
• Indian EV manufacturers pivot to light rare earth magnets as a temporary supply chain solution with technical limitations.
• The crisis exposes the global dependency on Chinese rare earth magnet production and potential supply chain vulnerabilities.

Bajaj Auto’s 50% production slump in July isn’t just a manufacturing hiccup—it’s a flashing red light for EV supply chains over-reliant on China. The Indian EV leader blames a shortage of heavy rare earth magnets, with no clarity on when shipments might resume. The culprit? Beijing’s tightening grip on heavy rare earth exports—particularly dysprosium and terbium, which are critical for high-temperature permanent magnets used in electric drive motors.

Bajaj’s fix? Switch to light rare earth magnets—a pivot also echoed by Ather Energy and reportedly being explored by TVS. While this switch enables some production recovery (now forecast at 60–75% of planned output through September), it’s a technical compromise. Light RE magnets (typically based on neodymium-praseodymium) offer inferior heat performance, requiring costly engineering trade-offs. The article correctly notes this, but underplays the technical limitations and downstream risks of widespread light RE substitution.

A REEx Review

The Livemint (opens in a new tab) article accurately highlights China’s continued stranglehold on heavy rare earth (RE) exports and correctly reports that Indian EV manufacturers like Bajaj and Ather are scrambling to reengineer their motors using more accessible light RE magnets. It also reflects the real-world consequences of this supply disruption, including delayed vehicle launches and missed dealer deliveries, with clear financial and reputational fallout. However, several important elements remain underexplored or speculative. For one, the article omits the fact that India imports nearly all of its magnets in pre-fabricated form from China or Japan—not as raw materials—which shifts the real bottleneck to the post-refining stage.

The claim that production is “improving month on month” lacks any quantitative detail, raising questions about the true scale of recovery. Most notably, the piece suggests light RE magnets are a viable substitute without addressing the widespread technical skepticism around this pivot, which could mislead investors. Critical gaps also remain in what the article doesn't say: there is no mention of India’s strategic policy response to the crisis, nor any independent verification of OEM claims. The absence of voices from suppliers, engineers, or analysts leaves the reader without a clear sense of how effective or scalable this magnet substitution effort really is.

Magnet Wars Just Got Real

Bajaj’s magnet pivot is one chapter in a much bigger story: the West and its allies waking up to Beijing’s monopoly over rare earth magnet production. As EV makers adapt on the fly, investors should watch for new supply chain entrants—and question how deep the magnet reengineering rabbit hole goes.