‘There is a lot of uncertainty,’ says Maruti Suzuki on rare earth magnet crisis

India’s biggest carmaker by volume, Maruti Suzuki India Ltd , has said that there is no disruption in its operations due to the rare earth magnet issue as of now.

“There is a lot of uncertainty and the situation is continuously evolving. We are monitoring the situation and pursuing multiple solutions to ensure continuity in our operations. If and when there is any material impact to our business, we will inform all stakeholders in line with regulatory requirements,” the automaker’s management told reporters on the sidelines of Bharat NCAP (BNCAP) announcement on Wednesday.

The clarification comes hours after media reports said that the Japanese carmaker has reduced its short-term production plans for its maiden electric vehicle, the e-Vitara, by around two-thirds due to a shortage of rare earth materials.

In April, China curbed shipments of rare earth magnets that are used for making components like speedometers, electric motors, e-axles, and speakers, among others. The Chinese government had earlier asked companies to provide an end-user certificate. But Beijing has yet to approve any of these requests from Indian companies.

China, the world’s dominant exporter of rare earth magnets, imposed export restrictions on seven rare earth elements and finished magnets, mandating export licences. The revised framework demands detailed end-use disclosures and client declarations, including confirmation that the products will not be used in defence or re-exported to the US.

India sourced over 80% of its 540-tonne magnet imports from China last fiscal.

According to Crisil Ratings, by the end of May, nearly 30 import requests from Indian companies were endorsed by the Indian government, but none have yet been approved by the Chinese authorities, and no shipments have arrived.

With the clearance process taking at least 45 days, this added scrutiny has significantly delayed approvals. And the growing backlog has further slowed clearances, tightening global supply chains.

Rare earth magnets could emerge as a key supply-side risk for India’s automotive sector if China’s export restrictions and delays in shipment clearances persist, said Crisil. A disruption lasting beyond a month can impact electric vehicle launches, affect production and weigh on the sector’s growth momentum, the rating agency said.

Rare earth magnets are integral to permanent magnet synchronous motors (PMSMs) used in EVs for their high torque, energy efficiency and compact size. Hybrids also depend on them for efficient propulsion. In internal combustion engine (ICE) vehicles, the use of rare earth magnets is largely limited to electric power steering and other motorised systems.

“The shortage of rare earth magnets is forcing automakers to reassess supply-chain strategies. Despite contributing less than 5% of a vehicle’s cost, these magnets are indispensable for EV motors and electric steering systems. Automakers are actively engaging with alternative suppliers in countries such as Vietnam, Indonesia, Japan, Australia, and the US, while also optimising existing inventories,” said Poonam Upadhyay, Director, Crisil Ratings.