China’s Rare Earth Export Curbs Spark Fears of Automotive Shutdowns

Global Car Industry at Risk as China Tightens Grip on Critical Minerals

China’s decision to expand export restrictions on rare earth elements has triggered serious concerns across the global automotive industry. Manufacturers and suppliers are warning of possible production shutdowns if essential magnet supplies are disrupted in the coming months.

The new controls, introduced in early April, target seven rare earth elements—particularly those used in electric vehicles (EVs), wind turbines, and military equipment. This move is seen as retaliation against the United States following President Donald Trump’s decision to impose steep tariffs of up to 145% on Chinese goods.

Rare Earth Inventories Running Low

Industry insiders report that current stockpiles of key materials may only last between three and six months. According to Jan Giese, a metals trader at Germany’s Tradium, most carmakers and suppliers hold just two to three months’ worth of high-performance magnets, sparking a scramble to source alternative supplies.

“If we don’t see magnet deliveries to the EU or Japan in that time, then I think we will see genuine problems in the automotive supply chain,” Giese warned.

The Minerals Under Threat

China’s new restrictions focus on “heavy” and “medium” rare earths such as dysprosium, terbium, and samarium. These minerals are crucial for producing heat-resistant magnets used in EVs, hybrid cars, drones, missiles, and fighter jets. Unlike “light” rare earths like neodymium and praseodymium—which remain unaffected for now—these heavy rare earths are harder to process and more scarce globally.

Industry Reaction: “Consequential” for EV Manufacturers

A senior executive in the automotive sector described the new export controls as a “7 or 8 out of 10” in terms of severity, particularly for electric vehicle producers such as Tesla.

“It’s a form of retaliation where China isn’t matching tariffs tit-for-tat, but instead targets strategic weaknesses, hoping companies pressure their own governments to shift trade policy,” the executive explained.

China's Near Monopoly on Rare Earths Processing

Although rare earths exist abundantly in the Earth’s crust, China dominates the processing of heavy rare earths due to its cheaper and more developed infrastructure. This gives Beijing considerable leverage in the current trade standoff, especially as it tightens licensing requirements and bans re-exports of these materials to the United States.

Since 2023, Beijing has steadily expanded controls on strategic minerals in response to US export bans on advanced technologies. The latest rules, however, have not been applied consistently, leaving many exporters uncertain about how they’ll be implemented in practice.

Alternative Supply Chains in the Making – But Not Ready Yet

Japan and other nations are urgently investing in alternative supply chains to reduce dependence on China. Australian mining firm Lynas is expected to begin production of dysprosium and terbium at its Malaysian site by mid-2025, but that may come too late to avoid short-term disruptions.

A Japanese official acknowledged the current stockpiles would not be sufficient if export bans persist: “The issue is whether we can build the new, alternative supply chain in time for our stockpile to survive this.”

Export Licence Delays Fuel Uncertainty

Traders report that some Chinese exporters have already declared force majeure and withdrawn rare earth materials from international markets. This has led to greater opacity around pricing and raised fears that a supply crunch could emerge suddenly.

Experts also point out that China may use the delays in issuing export licences to quietly restrict exports without triggering direct economic backlash.

Conclusion: Global Car Industry Faces Uncertain Road Ahead

China’s rare earth export controls are more than just a diplomatic manoeuvre—they pose a real threat to the global car industry. With electric vehicles relying heavily on high-performance magnets made from these materials, prolonged restrictions could trigger production delays, supply chain bottlenecks, and rising manufacturing costs.

The uncertainty surrounding licence approvals, coupled with limited global processing capacity outside China, has placed automakers in a precarious position. While efforts are under way to develop alternative supply chains, these projects are still months—if not years—away from providing relief.

For global markets, the ripple effect could include price volatility in critical minerals, slower EV adoption, and broader disruptions in technology sectors that also rely on rare earths. As geopolitical tensions escalate, industries worldwide may be forced to rethink their sourcing strategies to secure long-term stability.

Source: (FT.com)