[Source/Observer Network Qi Qian] The global auto industry is concerned about the possibility of production delays and disruptions due to China's export control on rare earth magnets. According to a June 3 report by the Wall Street Journal, global top automakers are racing to find solutions as they fear that some car production lines may shut down within weeks. Sources familiar with the matter revealed that some automakers and their suppliers are considering moving part of the production of automotive components to China.
The report stated that these automakers are considering producing electric motors in Chinese factories or shipping US-made motors to China for installing magnets.
Sources speculated that the method of transferring production to China to circumvent the export control on rare earth magnets might work because China's export restrictions only cover magnets, not finished components. A supply chain manager of an automobile manufacturer said, "If you want to export a magnet from China, they won't allow it. But if you can prove that this magnet is inside an engine made in China, you can do so."
The Wall Street Journal mocked that if automakers ultimately transfer part of their production to China, it will be a boomerang obtained after President Trump initiated a trade war. Trump has always insisted that he raised tariffs to bring manufacturing back to the United States.
U.S. Ford Motor Production Line - Ford Company Website
The report noted that transporting a chocolate-sized magnet across half the world to install on incomplete parts will undoubtedly increase manufacturing costs and time, and may subject automakers to additional tariffs. However, these companies believe that this might be the only option to avoid completely shutting down some production lines, while other alternatives would be worse. Sources familiar with the planning indicated that many other ideas under consideration may not materialize.
It was reported that automobile companies are also seeking alternative sources for magnets instead of directly sourcing them from Chinese factories. However, an executive of one company stated that none of these sources can provide enough magnets to meet the demands of the automotive industry.
It was introduced that the lack of magnets hits electric vehicles and hybrid cars harder than traditional sedans and trucks. An electric vehicle contains far more rare earth elements than a gasoline-powered car, but any modern car is equipped with rare earth magnets.
However, producing more fuel-powered cars instead of electric vehicles is not a solution, as companies may face risks of not meeting federal fuel economy standards and risk penalties. Another option is to revert to using outdated electric motor technology that does not use rare earth magnets. However, major automakers stopped using these motors previously because the current versions are cheaper and more efficient.
Rare Earth Magnet Material Image - Social Media
In April this year, when U.S. President Trump imposed excessively high tariffs on China, Beijing quickly retaliated by implementing export controls on a series of critical minerals and rare earth magnets. At the time, the Financial Times cited industry insiders reporting that China was establishing an export licensing system.
Foreign media believe that this move disrupts the core supply chains of global automobile manufacturers, aerospace manufacturers, semiconductor companies, and military contractors. It not only highlights China's dominant position in the critical mineral industry but is also seen as a key card held by China in its trade博弈 with the U.S. According to data from the U.S. Geological Survey (USGS), China accounts for nearly 70% of global rare earth production.
The report stated that rare earth magnets are essential materials for assembling numerous products ranging from automobiles, drones, robots, to missiles. Ships loaded with these materials are currently stranded at multiple ports in China, awaiting the establishment of a new export licensing system. Once implemented, it may permanently cut off the supply sources for some enterprises, including U.S. military contractors.
The Wall Street Journal mentioned that in the automotive industry, rare earth elements enable electric vehicle engines to operate at high speeds. They are also used in non-special but equally important functional components such as windshield wipers and headlights. It was revealed that due to the actual stagnation of China's rare earth magnet exports, automakers are facing a difficult choice of whether they can continue to maintain partial factory operations.
In May, the Alliance of Automobile Innovators and the Motor & Equipment Manufacturers Association (MEMA) wrote to the Trump administration stating that without more rare earth components from China, automobile production may decrease or stop immediately.
This industry organization representing most major automakers and component suppliers stated in the letter, "Although we are working hard to strengthen supply chains outside of China, this requires more time and will not alleviate the current shortage of critical components needed for domestic automobile production."
Previously, the largest automotive parts supplier Bosch Group stated in May that the new regulations from China have affected suppliers, but declined further comment. Mercedes-Benz stated in a written statement that it is closely assessing and monitoring the situation, adding that it has not had a direct impact on Mercedes-Benz so far. Volkswagen did not immediately comment.
According to Reuters, from Tokyo to Washington, China's export controls have caused strong vibrations among corporate boards and government officials in various countries. Officials are urgently seeking limited alternative solutions, fearing that production of new vehicles and other products may stall before the end of summer. Diplomats, automakers, and other industry executives from India, Japan, and Europe are urgently seeking meetings with Chinese officials to expedite the approval of rare earth magnet exports.
On May 29, the spokesperson for the Ministry of Commerce stated that implementing export controls on items with obvious dual-use attributes is an international practice. As a responsible country, China's implementation of export controls on relevant items reflects its consistent stance of upholding world peace and regional stability.
After the Geneva economic and trade talks, the Trump administration successively introduced several discriminatory restrictive measures against China, including issuing AI chip export control guidelines, halting sales of EDA design software to China, and announcing the revocation of Chinese student visas, severely impacting and destroying the consensus reached.
On June 2, the spokesperson for the Ministry of Commerce pointed out that the US unilaterally continues to provoke new economic and trade frictions, increasing uncertainty and instability in bilateral economic and trade relations. Instead of reflecting on itself, the US blames China unjustly, which seriously deviates from the facts. China firmly refuses such unjustified accusations.
The spokesperson said, "We urge the US to move in the same direction as China, immediately correct the erroneous practices, jointly uphold the consensus of the Geneva economic and trade talks, and promote the healthy, stable, and sustainable development of Sino-US economic and trade relations. If the US insists on going its own way and continues to harm China's interests, China will continue to take resolute measures to safeguard its legitimate rights and interests."
This article is an exclusive contribution from the Observer Network and cannot be reprinted without permission.
Original source: https://www.toutiao.com/article/751199328311984666/
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