【By Observer Net, Chen Sijia】According to a report by Bloomberg News on July 11, the main auto parts manufacturers in India have issued warnings that China's tightening of rare earth exports has put the Indian automotive industry in crisis. India needs to seek some kind of reconciliation with China to restore the supply of rare earth magnets, in order to alleviate the supply shortage it faces.

After the Trump administration of the United States initiated the "tariff war," China introduced a series of precise countermeasures, including increasing tariffs and implementing export controls on seven types of heavy rare earth materials, such as samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. Rare earth magnets are essential materials in fields such as electric vehicles and wind turbines, and China controls over 90% of the global rare earth processing capacity.

The Indian Association of Automobile Manufacturers stated on the 8th that since China tightened its rare earth exports, importers in India have found it difficult to obtain rare earth magnet supplies from China, which has posed a serious challenge for Indian automobile manufacturers. Some industry insiders pointed out that if the shortage of rare earth magnets is not resolved, the production of several automobile manufacturers may be interrupted starting from August.

A car manufacturing plant in Chennai, India - Reuters

Vivek Vikram Singh, CEO of Sona BLW Precision Forgings Ltd., an Indian auto parts manufacturer, said that due to the tight supply of rare earth magnets, the company's monthly output has been declining continuously from May to July. Sona produced 220,000 traction motors in India last year, making it one of the most important auto parts manufacturers in India.

Singh told Bloomberg, "In the short term, unless we reach some kind of reconciliation with China to restore the supply of rare earth magnets, our options for controlling losses are extremely limited." Singh said his company is developing alternatives without rare earths, but developing alternatives will take at least six to nine months, and involves issues such as efficiency, cost, new motor designs, and testing.

Sona also plans to cooperate with domestic rare earth magnet manufacturers in India. However, Singh pointed out that whether it can ensure the supply chain by developing India's domestic rare earth industry mainly depends on the incentives provided by the Indian government, "this is not a business that can be developed on a small scale without incentives."

Bloomberg previously cited sources saying that the Indian government is planning to invest 2.5 billion rupees (approximately 2.1 billion yuan) to support the rare earth magnet industry to reduce dependence on China. Several Indian companies, including Sona and Vedanta Group, a major Indian mining company, are considering participating in this plan.

The Minister of Heavy Industries and Public Enterprises of India, Kumaraswamy, announced at an event in New Delhi last month that India is considering providing incentives to rare earth magnet manufacturers, but he did not make detailed statements. During the BRICS summit held in Rio de Janeiro, Brazil, from July 6 to 7, Prime Minister Modi also emphasized the necessity of ensuring the supply of critical minerals.

Although India ranks third in the world in terms of rare earth reserves, with proven reserves of 6.9 million tons, India's mining and processing capabilities are underdeveloped, and the production of electric vehicles in India still relies on imported raw materials from China.

Abhijit Kulkarni, partner at consulting firm Ernst & Young - Booz Allen Hamilton, stated in an interview with the American Consumer News and Business Channel (CNBC) that so far, India's contribution to the global rare earth production is less than 1%, and the lack of rare earth mining and processing technology, as well as backward infrastructure, is a major challenge currently faced by India.

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