Is India's ICE-Dominant Auto Sector Shielded from China's Rare Earth Curbs? ET Auto Thinks So. But Is That the Full Story?

Highlights

• Despite current ICE vehicle dominance, India risks future rare earth magnet dependency without strategic domestic value-chain development.
• China's 2025 rare earth export restrictions could have significant long-term impacts across automotive, industrial, and defense sectors.
• Urgent action needed in REM mining, refining, and magnet production to mitigate potential supply chain vulnerabilities.

In a June 17 article for ET Auto, the editorial team cites a Nuvama report arguing that India’s rare earth magnet (REM) exposure is minimal due to its overwhelming reliance on internal combustion engine (ICE) vehicles—over 95% of the market. Because permanent magnet synchronous motors (PMSMs), which use REMs like NdFeB and SmCo, are primarily found in electric vehicles (EVs), the argument goes that China’s April 2025 export restrictions on seven REEs won’t significantly impact India’s auto sector—at least not yet.

At first glance, this logic appears to hold. As of FY25, electric vehicles (EVs) and hybrids in India remain nascent, with only 7% penetration in two-wheelers and 3% in passenger vehicles. REM usage per vehicle in ICE cars is just 0.1 kg, compared to 0.8 kg in electric vehicles (EVs). So the argument is that India can temporarily sidestep global supply chain shocks.

But Rare Earth Exchanges (REEx) urges caution. The piece misses three strategic truths:

1. Time Lag ≠ Immunity: India’s EV push is accelerating. Delayed localization of REM supply today means deeper dependency tomorrow, precisely when demand spikes.
2. Ripple Effects Go Beyond Vehicles: REMs are critical not just for EVs but also for industrial motors, wind turbines, and defense, a sector India is rapidly expanding.
3. Policy Blind Spot: Betting on ICE dominance as a shield undermines India's decarbonization goals and distracts from the urgent need for domestic value-chain development in refining and magnet production.

In short, India may not feel the pain today, but without aggressive action—IREL reform, private-sector REE mining, and midstream investment—the consequences will be severe.

Source: ET Auto Desk, “ICE-dominant India auto sector likely to be immune from China’s rare earth export curbs: Nuvama,” June 17, 2025.

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