China eases rare earth export curbs: What lies ahead for India’s auto industry

It’s indeed good news for India’s automotive sector. China’s Ministry of Commerce (MOFCOM) has recently eased its rare earth export policy by issuing licenses to key Indian auto component players. First reported by Business Standard on December 26 and corroborated by industry publications like Silicon India and Rare Earth Exchanges, the move marks a tactical shift in Beijing's trade stance.

However, the relief comes with a critical "civilian-use only" clause. While the policy reportedly provides relief to companies like Jay Ushin and vendors for Maruti Suzuki and Mahindra, any military or dual-use applications remain strictly blocked.

Strategic ‘choke point’ for India

The timing of this easing is critical. According to a November 2025 report by ICRA, India relies on China for 80-85% of its rare-earth permanent magnet (REPM) requirements. Demand has accelerated sharply since FY2022, driven by a surge in electric vehicle (EV) adoption and renewable energy projects. Despite diversification efforts, China’s dominance remains absolute, making India’s industrial growth closely tied to Chinese exports.

The financial stakes are high:

• e-2W Segment: While a motor costs between ₹8,000-₹15,000, rare-earth components alone account for ₹2,500-₹4,500 of that value.

• e-PV Segment: For passenger vehicles, where motors cost between ₹70,000-₹1,50,000, the rare-earth contribution jumps to ₹20,000-₹45,000.

China's leverage is backed by its control of 69% of global production, 90% of processing, and 49% of global reserves, ensuring it can influence markets for decades unless meaningful alternatives are found.

India’s path to self-reliance

In response, the government of India has launched a ₹7,280 crore scheme to indigenise REPM manufacturing. Key outcomes include:

• Integrated value chain: Establishing India’s first facilities to convert oxides to finished magnets, securing supply for EVs, renewables, and defense

• Industrial resilience: Producing 6,000 MTPA of REPM locally. This is expected to meet 70-75% of domestic requirements by 2030, slashing import dependency from 100% to just 25-30%

• Economic impact: The ₹7,280 crore in incentives will attract high-value investments and create jobs through competitive bidding for five beneficiaries

Mitigation strategies

Beyond government policy, Indian OEMs are implementing several de-risking strategies:

• Diversification: Actively securing alternative global sources to reduce Chinese reliance.

• Ferrite motors: Proactively developing ferrite magnet-based motors to accelerate localisation.

• Circular economy: Innovating in rare-earth recycling from e-waste to create a sustainable supply chain.

Bridge, not destination

While China’s easing of export licenses provides much-needed breathing room for Indian automakers, it serves as a tactical bridge rather than a permanent solution. The ‘civilian-use’ restriction highlights that India remains vulnerable to geopolitical levers. For India to achieve true self-reliance or ‘atmanirbharta’, the focus must remain on the ₹7,280 crore REPM mission.