India’s EV ambitions hit China's rare earth roadblock; supply chain risks extend to batteries: ACMA

China’s export controls on rare-earth magnets, graphite and other critical minerals exposed the vulnerability of India’s electric-vehicle supply chain in 2025, disrupting production plans and pushing up input costs for manufacturers.

According to a latest report by the Automotive Component Manufacturers Association of India (ACMA), China’s licensing requirements for rare-earth magnets created supply constraints for EV motor lines in India, with supplies easing only by September 2025.

“China controls around 90% of global rare-earth processing, while India sources nearly 85% of its rare-earth magnets from China,” the report said.

China’s exports of rare-earth magnets fell by around 74% year-on-year in May 2025 following the licensing curbs.

The report says, “India sources 85% of these magnets from China, and makers were left with a few weeks of stock in 2025,” forcing passenger-vehicle and two-wheeler makers to cut or defer EV production. One leading OEM scaled back its planned output for a new EV model by about two-thirds.

China’s control over rare earth minerals rose international prices

According to the report, the supply-chain risk extends to batteries as well. China placed graphite under export permits in 2023, while battery-grade graphite processing remains almost entirely concentrated in the country. India imports nearly all of its lithium-ion cells, leaving its growing EV-battery ecosystem significantly exposed to China-linked supply chains.

China also placed gallium and germanium under export licensing in 2023 and antimony in 2024. All three are among the 30 critical minerals identified by India in 2023.

“International prices rose sharply after the controls (gallium was 2.5x pre-control prices in 2025). India imports these, and all three are on its list of 30 critical minerals (2023); a large Indian battery maker reported a fall in expected income due to higher antimony prices,” the report mentioned.

Passenger vehicle market to expand rapidly

The dependence comes as India’s automobile market continues to expand rapidly. Passenger-vehicle sales rose from around 2.8 million units in FY16 to nearly 4.6 million units in FY26. Growth accelerated to around 11% annually over the past five years, more than double the ten-year pace.

India is now the world’s third-largest passenger-vehicle market, up from fifth place a decade ago.

According to the report, the two-wheeler market has also grown, with sales rising from around 16.5 million units in FY16 to nearly 21.7 million units in FY26. Household penetration increased from about 40% a decade ago to around 60% today.

India’s broader auto growth has helped it become the world’s third-largest automotive market. It ranked sixth by vehicle sales in 2014-15, fourth by 2019-20 and reached third place in 2022, a position it has retained since.

At the same time, India’s relatively small share of global component trade points to a major opportunity. India accounts for less than 5% of global component trade, compared with China’s around 12%. Auto-component exports have already more than doubled from $11 billion in FY16 to $24 billion in FY26.