[Source/Observation Network by Shao Yun]

Reuters reported on May 29 that according to multiple Indian business executives and industry organizations, India's automotive production may come to a halt within days due to China's export restrictions on rare earth magnets. The report stated that relevant Indian enterprises are urging the government to intervene and seek relaxation of the restrictions from China.

According to an undisclosed document seen by Reuters, at a meeting with Indian Ministry of Commerce officials last Monday (the 19th), the Society of Indian Automobile Manufacturers (SIAM) pointed out that the rare earth magnet inventory of Indian component manufacturers is expected to be depleted by the end of May. The report cited the document as saying that if the export restrictions continue, "it is expected that from the end of May or early June, the production of India's automotive industry will come to a standstill."

According to SIAM's official website, SIAM is the highest national organization in India's automotive industry, representing all major automobile and automotive engine manufacturers in the country, including Maruti Suzuki, the Indian subsidiary of Suzuki Motor Corporation, Mahindra & Mahindra Group's namesake automobile, motorcycle, and agricultural machinery brands, as well as Tata Motors. It was reported that executives from these three companies also attended the meeting on the 19th.

According to Reuters, after progress was made in high-level economic and trade talks between China and the United States, some rare earth magnet exporters' export permits have been approved. However, three unnamed Indian automotive industry executives expressed concerns that tensions between China and India might slow down the already cumbersome process of importing rare earth magnets due to India's own government requirements.

It is understood that Indian companies not only need approval from multiple departments in India but also have to submit documents such as "end-use certificates" to prove that the magnets will not be used for military purposes in order to import rare earth magnets. Afterward, the relevant documents must be verified by the Chinese Embassy in India before being used by Chinese suppliers to apply for export licenses from China's Ministry of Commerce. The SIAM document suggests that the Indian government should approve the importer's application within "hours" and urge China to expedite the approval process.

As one of the high-value downstream products of rare earth elements, rare earth magnets are not only key components of electric vehicle engines but also necessary for the production of parts like electric windows and speakers in traditional cars. China largely dominates the global rare earth supply chain. According to estimates by the International Energy Agency (IEA), more than 60% of the world's rare earth materials were mined in China in 2023, and as much as 92% of rare earth materials were refined and processed in China.

Global distribution of rare earth material refining output in 2023. Map by BBC.

For complete vehicle production, although rare earth magnets are small, they are indispensable. According to Reuters, SIAM and the Automotive Component Manufacturers Association of India (ACMA) pointed out in another document submitted to the Indian government on the 19th that, "Although the cost of imported rare earth magnets in complete vehicles is negligible, the risk lies in the fact that even the absence of one component can prevent the vehicle from leaving the production line."

Industry insiders estimate that during the fiscal year ending March 31, 2024, the Indian automotive industry imported a total of 460 tons of rare earth magnets, most of which came from China. The estimated import volume for this fiscal year is expected to increase to 700 tons, worth about $30 million. However, since China implemented export controls on seven categories of medium and heavy rare earth-related items in early April, customs data shows that China's permanent magnet exports fell by 51% year-on-year in April, to 2,626 tons.

In early April this year, in response to former U.S. President Donald Trump's insistence on starting a tariff war, China also introduced a series of countermeasures, including export control measures on seven categories of medium and heavy rare earth-related items such as samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. At that time, some Indian analysts pointed out that China's export control measures on rare earths were causing supply chain bottlenecks in India's rapidly growing electric vehicle industry, directly leading to production delays, rising raw material costs, and slowed research and development of advanced electric vehicle motor technologies.

Currently, India is promoting private sector participation in the exploration and mining of critical minerals through the "National Critical Minerals Mission" (NCMM) plan, attempting to reduce its own supply chain vulnerabilities. Therefore, there are also voices within India advocating that China tightening its rare earth exports may unintentionally weaken its dominant position in the global rare earth competition. In response, Indian economist Ajit Ranade and Shradhul Manurkar, a member of the research team of the Center for AI and Digital Policy (CAIDP), a U.S. think tank, wrote in an article in The Times of India on the 26th, refuting this argument.

"China's rare earth strategy is more resilient than it appears on the surface." The article states that China's dominance in the global rare earth and critical mineral sectors is not accidental but the result of systematic planning over decades through deep investment, supply chain integration, and strategic acquisitions. Although other countries are trying to diversify their supply chains to reduce dependence on China, China's industrial scale and technological advantages are difficult for others to match. The article believes that it is neither realistic nor achievable in the short term for India's rare earth supply to completely detach from China. Establishing alternative capacity and reducing dependence requires years of sustained effort and coordinated national vision and international cooperation.

Regarding China's dual-use item export control measures, spokesperson He Yongqian of the Ministry of Commerce responded on May 29 that implementing export controls on items with obvious civilian-military dual-use attributes is an international practice. As a responsible country, China's implementation of export controls on related items reflects its consistent stance of upholding world peace and regional stability.

This article is an exclusive piece by Guancha Network and cannot be reprinted without permission.

Original article: https://www.toutiao.com/article/7509841614983021071/

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