【By Observer News, Zhang Jingjuan】China's recent targeted countermeasures against the United States have also made India struggle. According to an article from India's Deccan Herald on July 7, China's tightening of rare earth exports is causing a crisis in India's automobile industry.
The report states that China controls over 90% of the global processing capacity for rare earth permanent magnets, a material that is not only crucial for the automotive industry but also indispensable in clean energy and household appliances.
Industry exporters said that due to heavy reliance on Chinese rare earth permanent magnets, the Indian automobile industry is facing a potential crisis.
Rajiv Memani, chairman of the Confederation of Indian Industry (CII), stated directly that the issue in the automobile industry is more serious than it currently appears.
On April 2, the Trump administration announced "reciprocal tariffs" on Chinese goods. Just two days later, China introduced a series of measures to precisely retaliate, including additional tariffs and export controls on seven types of medium and heavy rare earth items, such as samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium.
Industry sources pointed out that if the shortage of rare earth permanent magnets is not resolved, several automobile manufacturers may face production interruptions starting in August.
Rajeev Bhatia, president of JATO Dynamics India, an automobile market intelligence and analysis company, had previously stated that the outlook for India's automobile industry is not optimistic. He estimated that the production of many vehicle models might be delayed by 2 to 6 months, and prices could also rise by 5% to 8%.
According to the report, the Society of Indian Automobile Manufacturers (SIAM) and the Association of Indian Automotive Component Manufacturers (ACMA) have called on the government to intervene.
The Indian Ministry of External Affairs recently stated that India is engaging with China to seek solutions to this issue.
Electric vehicle charging station in India, Reuters
According to the 2024 global automobile production data, India is the fourth largest automobile producer in the world after China (31.28 million units), the United States (10.56 million units), and Japan (8.23 million units). After China tightened its export control measures on rare earths, India's automobile production faces supply chain challenges.
Earlier reports from Hong Kong media South China Morning Post stated that as a global leader in electric vehicle components and rare earth processing, China's export restrictions are bringing new uncertainties to India's rapidly growing electric vehicle industry.
According to the report, India's electric vehicle sales exceeded 1.9 million units in 2023 (accounting for 3.6% of total domestic car sales; note: Indian car sales include various types of vehicles such as two-wheelers, three-wheelers, etc.), but almost all models depend on imported parts from China. In 2024 alone, India imported about $7 billion worth of electric vehicle batteries and magnets from China.
The report pointed out that although India ranks third in rare earth reserves, with about 6.9 million tons of rare earth reserves, due to underdeveloped domestic mining and processing capabilities, India's electric vehicle production still relies heavily on imports from China. China's advanced refining facilities and efficient supply chain system have left India dependent on others in these key raw materials.
The Deccan Herald reported that China's export restrictions on rare earth permanent magnets have exposed India's vulnerability, serving as a warning. India must take urgent action to increase domestic exploration and production of critical materials, reducing its dependence on the China-dominated global supply chain.
Memani said, "This is a good wake-up call for India, not just regarding rare earths, but also involving all those areas where we rely heavily on external supplies, whether it is pharmaceutical ingredients, penicillin, or other products."
Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI) in India, believes that reverse engineering of imported mid-to-low-end technology products, providing incentives for domestic production, and long-term investments in deep technology manufacturing will help reduce India's excessive reliance on its geopolitical rivals.
"The window of opportunity for action is narrow, but the urgency is evident," Srivastava said.
Map showing the reserves (left) and production (right) of the top seven countries in rare earth reserves, produced by India's Mint
According to the report, nearly 90% of the goods India imports from China belong to the mid-to-low-end technology category, including textiles and agricultural machinery, faucets, valves, pumps, compressors, hardware, molds, bearings, motors, nuts and bolts, and even stationery.
GTRI wrote in a report that these are not beyond India's technological capabilities. Through strategic phased measures, this dependence can be significantly reduced.
However, in high-tech areas, India needs to cultivate enterprises capable of designing and manufacturing advanced components and provide them with targeted financial and regulatory support.
China has remained India's largest trading partner for years, with bilateral trade reaching $138.478 billion in 2024, but India's trade deficit with China is close to $100 billion. Currently, Chinese companies supply over 80% of India's demand for laptops, solar panels, antibiotics, rayon yarn, and lithium-ion batteries.
The report pointed out that this exposes India's vulnerability when facing Chinese export restrictions.
According to another report from The Times of India, to reduce dependence on China, India will invest between 35 billion to 50 billion rupees (approximately 2.93 billion to 4.18 billion yuan) to launch a local rare earth production expansion plan. Analysts believe that India has the potential to become an important rare earth supplier outside of China, but to achieve this goal, India must invest more funds and accelerate breakthroughs in the mining and processing technologies of key minerals.
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