Highlights

• China has a near-monopoly over rare earth mining (70%), refining (85%), and magnet production (90%), creating critical vulnerability for automakers.
• Recent export controls by China have caused production disruptions at Ford and inventory depletion across Tier-1 suppliers.
• Electric vehicles require 3-5 kg of NdFeB magnets per vehicle, which is 30-50 times more than conventional cars.
• 94% of EV traction motors still depend on rare earth permanent magnets, even though some automakers are exploring magnet-free alternatives.
• A projected 70,000-100,000 tonne NdPr deficit by 2035 is driving automakers to:
  • Diversify through upstream investments such as the GM-MP Materials partnership.
  • Pay premiums of 10-30% for non-Chinese supply.
  • Develop AI-optimized designs that reduce rare earth intensity by 24%.

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The global automotive industry is deeply intertwined with rare earth elements (REEs) — from the metals mined out of the ground to the permanent magnets that power modern vehicles. These 17 specialty metals (including neodymium, praseodymium, dysprosium, and terbium) are tiny in volume but outsized in importance. They enable essential components across both electric and conventional vehicles, yet their supply chain is alarmingly concentrated.

Automakers (OEMs) and their Tier-1 suppliers (the companies that make motors, actuators, electronics, and major subsystems) now face a stark reality: China’s near-monopoly over rare earth mining, processing, and magnet production presents a strategic vulnerability. This article summarizes at a high level the industry’s dependence on rare earth-based products, how OEMs and suppliers procure these critical materials, and the risks and responses shaping the road ahead.

Rare Earths in Cars: Essential and Everywhere

Rare earth elements sit quietly behind many features in today’s vehicles. NdFeB rare-earth magnets enable small electric motors that power mirrors, seats, pumps, and sensors. A typical gas or hybrid car contains about 100 grams of REE magnets, scattered across dozens of small systems.

In electric vehicles (EVs), however, magnet demand skyrockets. Each EV typically contains 3–5 kg of NdFeB magnets, largely in the traction motor that converts electricity into motion. As of 2025, an estimated 94% of EV traction motors use permanent-magnet architectures due to their efficiency and power density.

A minority of automakers have introduced magnet-free alternatives:

• BMW, Renault: externally excited synchronous motors
• Mercedes, Audi: induction motors
• Tesla: stated an intention for a next-generation rare-earth-free motor, though the company later clarified that complete elimination of REEs is not guaranteed.

Today, these REE-free systems remain the exception. The vast majority of EVs and hybrids still rely on rare earth magnets — anchoring global automotive growth directly to REE availability.

OEMs and Tier-1 Suppliers: Shared Dependence, Different Roles

OEMs (Ford, GM, Toyota, Volkswagen, etc.) ultimately need REE-based components for their vehicles. Tier-1 suppliers (Bosch, ZF, Denso, BorgWarner, Marelli, Schaeffler) are the ones integrating magnets into motors and electronics. Together, they have long depended on China.

As of 2025:

• 70% of global REE mining occurs in China
• 85% of refining capacity sits in China
• ~90% of REE alloys and magnets are made in China

This dominance delivered low-cost supply for decades. But it also created a single-point-of-failure risk. A senior Toyota North America sourcing executive was quoted in industry accounts saying China could “shut us down in two months.” That comment reflects a pervasive fear among OEMs: Beijing’s policy decisions could halt production in Detroit or Stuttgart.

This fear became real in 2025. When China tightened export rules and licensing requirements for key magnet materials, supply slowed to a trickle. According to Reuters, Ford experienced production disruptions at its Chicago SUV facility due to rare earth magnet shortages — with CEO Jim Farley describing operations as “hand-to-mouth.” Tier-1 suppliers for Hyundai reported that inventories “had already been depleted,” demonstrating how quickly shortages propagate downstream.

Procurement Strategies: From Stockpiling to Supply Chain Re-Engineering

Stockpiling & Non-China Premiums

OEMs and suppliers responded to China’s export controls by:

• placing rush orders,
• building buffer stocks,
• and shifting purchases to Europe or ASEAN even at 10–30% premiums.

Neo Performance Materials’ new Estonia magnet plant — one of the few outside China — reported customer demand “surging overnight.” Industry sources noted that European Tier-1 suppliers, including Schaeffler, were among the early buyers. Some Korean companies say their clients now willingly pay 15–20% more for Vietnamese magnets to avoid Chinese exposure.

Upstream Investments

OEMs are also rebuilding supply chains:

• GM + MP Materials: U.S. mine-to-magnet strategy in California and Texas
• GM + Vacuumschmelze: additional U.S. magnet facility
• Toyota: long-term partnerships with Australian REE projects and reduced-dysprosium magnet formulas
• Stellantis/Ford: exploratory REE deals and startup investments

Government Intervention

The U.S. and Australia jointly backed an $8.5 billion package of critical mineral financing and commitments. Europe’s Critical Raw Materials Act is pushing for domestic magnet production. Renault is piloting REE recycling from France’s ~400,000 annual end-of-life vehicles, though recovered volumes remain small for now.

Technology Substitution

Automakers explore:

• magnets using less Dy
• advanced ferrites
• AI-optimized designs cutting REE intensity by ~24%
• rare-earth-free motor architectures for mid-2030s mass production

But NdFeB magnets still dominate for performance-critical EV applications.

China’s Near Monopolistic Leverage

China not only dominates mining and processing — it possesses the world’s largest REE reserves and decades of state-directed industrial maturity. In 2010, it cut off exports to Japan. In 2023–2025, it introduced sweeping export licensing rules. Draft rules even signaled extremely low REE-content thresholds for export review.

China also wields price power. It can depress magnet prices to keep foreign competitors unprofitable, stalling new non-Chinese mines and magnet plants. Analysts estimate NdPr needs to sustain $75–$105/kg to incentivize new supply, but China can push prices toward $60/kg to squeeze rivals.

Rising Demand, Looming Shortfalls

Some estimates lead to approximately 70,000 to 100,000-tonne NdPr deficit by 2035, roughly equivalent to China’s entire 2021 output. The IEA notes that even if current global projects succeed, China’s share may only drop to ~60% by 2030 — still overwhelming.

The U.S. could theoretically meet 95% of its magnet REE demand domestically or via allies — but only if complex separation plants, including the uncertain Lynas Texas project, actually come online.

Final Thoughts

As vehicles become high-tech electric machines, automakers must think like high-tech manufacturers securing critical inputs. Rare earths sit at the center of this transformation. For at least the next decade, OEMs and Tier-1 suppliers will be juggling:

• diversification,
• stockpiling,
• upstream investment,
• alternative technology development,
• and constant geopolitical risk assessment.

The road to electrification runs straight through rare earth territory — and securing these elements is now as important as designing the cars themselves.

Sources

Primary News & Industry Reporting

1. Reuters – Multiple reports (2023–2025) on rare earth export controls, automotive supply chain disruptions, Neo Performance Materials’ Estonia magnet plant, Ford production impacts, and industry quotes from Hyundai suppliers and magnet executives.
2. Reuters – Reporting on China’s April 2025 rare earth export licensing rules and impacts on OEMs and Tier-1 suppliers.
3. Reuters – Coverage of GM’s mine-to-magnet partnership with MP Materials and GM–Vacuumschmelze magnet joint venture.
4. Reuters – Interviews and industry commentary on automakers’ willingness to pay premiums (10–30%) for non-Chinese magnets.

Company Statements & OEM/Tier-1 Disclosures

5. Ford Motor Company / Jim Farley – Public comments (2025) describing “hand-to-mouth” magnet supply conditions following China’s export controls.
6. Hyundai Motor Group Supplier Commentary – Statements reported by Reuters about depleted magnet inventories in late 2025.
7. Neo Performance Materials – Executive commentary (via Reuters) on customer demand “surging overnight” after China’s export-control changes.
8. General Motors – Announcements on MP Materials partnership and U.S. magnet factory plan with Vacuumschmelze.
9. Toyota Motor Corp. – Industry-circulated warnings regarding rare earth vulnerability, paraphrased and attributed cautiously.

Government, Policy & International Initiatives

10. U.S.–Australia Critical Minerals Partnership (2025) – U.S. and Australian government releases describing an up to $8.5 billion financing package spanning multiple critical mineral initiatives.
11. European Union – Critical Raw Materials Act (2024–2025) – EU publications outlining plans for domestic magnet production, recycling, and strategic stockpiling.

Technology, Engineering & Motor Design Sources

12. BMW, Renault, Mercedes-Benz, Audi – Company documentation and public engineering statements on magnet-free motor designs (EESM and induction).
13. Tesla Investor Day 2023 + follow-up clarifications – Statements describing intent to reduce or possibly eliminate rare earth magnets in future motors, later clarified without commitment to full elimination.
14. Monumo (UK) – AI-based motor design firm reporting 24% REE reduction in simulated remanufacturable motor architectures.

Recycling & Circular Economy Programs

15. Renault Group / The Future Is NEUTRAL – Official descriptions of France’s ~400,000 end-of-life vehicle recycling potential and ongoing REE recovery pilot programs.

Analytical, Market Forecast, & Expert Sources

16. Adamas Intelligence – Forecasts for NdPr supply/demand through 2035, including projected ~68,000-tonne NdPr deficit.
17. International Energy Agency (IEA) – Critical minerals supply and demand modeling referencing non-Chinese project pipelines and potential reduction of China’s share to ~60% by 2030.
18. Benchmark Mineral Intelligence – Expert analysis on supply constraints and project risk (“We will still be in trouble by 2030 — just less trouble”).
19. U.S. Geological Survey (USGS) – Data on global rare earth reserves (China ~44 million tonnes).

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