Ashwani Kumar on 2025-05-31
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Temporary Halt and Conditional Resumption
The ban, which raised fears of a production freeze in India’s automotive sector, was temporarily lifted after the Indian government gave written assurances that the imported magnets would not be used for defense purposes or re-exported to the US. The Directorate General of Foreign Trade (DGFT) has since issued 30 certificates for consignment approvals, allowing some flow of goods to resume.
Industry-Wide Alarm
Leading automakers including Maruti Suzuki, Mahindra & Mahindra, and Tata Motors have expressed serious concern over the disruption. The Society of Indian Automobile Manufacturers (SIAM) had earlier warned that without immediate government intervention, India’s auto production could face a full shutdown by the end of May or early June.
China’s Dominance in Rare Earth Supply
China currently commands over 90% of the global rare earth magnet market, giving it immense leverage in global trade. The export restrictions are part of broader geopolitical tensions and trade protection strategies, including responses to Western tariffs. The recent ban primarily targeted high-performance magnets, though confusion has halted even low-grade shipments.
Complicated Import Procedure
The process to import these magnets into India is now tangled in red tape. Importers must acquire approvals from multiple ministries, submit detailed end-use certificates, and get clearance from the Chinese Embassy in New Delhi. This paperwork is then forwarded to suppliers in China, who must wait for export licenses from Beijing.
Looking Ahead
According to customs data, rare earth magnet imports from China dropped by 51% in April, while India had imported 460 tonnes of these magnets in the last fiscal year. Industry experts estimate that India will need about 700 tonnes worth $30 million in 2025, a demand difficult to fulfill without stable ties with Beijing.
Unless strategic alternatives and domestic manufacturing capabilities are rapidly developed, India’s auto industry remains vulnerable to such external shocks. The situation underscores the urgent need for supply chain diversification and policy innovation to reduce dependency on a single source for critical materials.
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Frequently Asked Questions
Why did China ban the export of rare earth magnets to India?
China reportedly imposed the ban following Operation Sindoor, where India defeated Pakistan, a close ally of China. The move is seen as a geopolitical strategy to pressure India and restrict the use of rare earth magnets in defense and potential re-exports to countries like the U.S.
How critical are rare earth magnets to India’s automobile industry?
Rare earth magnets are essential components in electric vehicles (EVs) and electronic systems of regular cars. Without them, production could halt, severely affecting the auto sector.
Has India resumed imports of rare earth magnets from China?
Yes, after the Indian government provided assurances on end-use restrictions, the DGFT issued approvals for specific consignments. Some Chinese manufacturers have resumed exports under strict regulations.
What are the long-term risks for India’s auto sector due to this ban?
Over-reliance on China makes India vulnerable to future trade disruptions. A prolonged ban could lead to production shutdowns, supply chain delays, and a slowdown in EV adoption.
What steps is the Indian government taking to manage this crisis?
The government has expedited import approvals, engaged in diplomatic discussions, and is exploring ways to diversify rare earth supply chains and boost domestic production.
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