While major public-listed passenger vehicles makers have maintained, to some extent, uniformity in their outlook on the rare-earth magnet supply, alarm bells had rung for Bajaj Auto, India’s second-largest two-wheeler manufacturer after Hero MotoCorp, in June, when MD Rajiv Bajaj spoke forebodingly of a ‘zero’ production possibility in August. While the worst fears were kept at bay, he was prophetic, as during the Q1 results, chief financial officer Dinesh Thapar stated the company expected half of its electric two-wheeler output to be hit in Q2, despite the company looking at redesigning motors and sourcing magnets from outside China. The company had turned towards “tactical interventions” and even formed a “crack team” for immediate recourse.

By August-end, the Pulsar-maker was able to turn around its woes as it secured a sufficient supply of rare-earth magnets and other key materials, ahead of the festive season. “We started receiving clearance for our shipments of light rare-earth magnets about three to four weeks ago,” Rajiv Bajaj was quoted in media reports. Production of Chetak electric scooters restarted ahead of schedule. Now, the company looks to nearly triple Chetak’s production from 15,000 units in August to 40,000 by September. The long-term plan is to potentially de-risk the supply crisis by designing components that do not require any rare-earth magnets.

This is a template that is gaining popularity among Bajaj’s peers as well. Ather Energy, the prominent pure-play EV maker, is also mulling shifting production to heavy, rare-earth-free magnets or moving away from rare-earth to ferrite. “I’m more optimistic about moving to rare-earth magnets from heavy rare-earth magnets because rare-earth magnets don’t have an export ban and have a little bit more supply available globally, with China not being the only one,” says co-founder and CEO Tarun Mehta. China’s export curbs specifically target heavy rare-earth elements and the magnets made with them. However, nearly all global supply chains of rare-earth magnets still rely on China.

Similarly, Ather’s rival Ola Electric has already stated it has plans to introduce rare-earth-free motors by the next quarter. “For the past couple of years, we have been developing rare-earth-free motors,” the company stated in a letter to shareholders. The Bhavish Aggarwal-led company accelerated this programme in April and has “already productionised” its rare-earth-free motors. “These motors ensure no business continuity risk, are parity in performance, and save money as rare-earth magnets are costly,” the company added. For the short term, it has reasonable inventory levels and has been sourcing the rare-earth magnets from two countries of origin. “And since we are not reliant on intermediary motor suppliers, we’ve been able to change over quickly and ramp up other sources of rare earth magnets,” it added.

Ather admits it faced seven days’ worth of impact due to the rare-earth crisis. “The right way to see this would be not like production stopped for seven days, but a possible gap in our ability to supply our dealers’ demand for up to about a week for this entire quarter,” Mehta says. However, he remains optimistic that any impact would be restricted to Q2. “China has banned the export of heavy rare-earth magnets, which leaves few options for anybody.” Another option is to partially assemble motors in China and not import magnets. Without elaborating further, Mehta says he will be able to provide more colour by the end of Q2.

As for Bajaj, the company expects the supply of rare-earth magnets to be better than its previous estimates. As a result, it is optimistic about meeting the festive demands. The ride maker has also claimed that Chetak’s retail volumes more than doubled year-on-year, comprising half of the industry’s incremental volume.

Meanwhile, Hero MotoCorp fared relatively better in the rare-earth stockpile. Acting CEO Vikram Kasbekar says the company is covered for Q2FY26 in the ICE and EV segments. He says, “Supplies normalised for us during the quarter. We continue to work on alternatives, and this is something that we will try to circumvent.”

TVS Motor, whose iQube leads the two-wheeler industry with a 6.3% share, has also taken measures such as local sourcing and exploring alternatives. “We also resized some locally available higher-sized magnets,” says K.N. Radhakrishnan, director and CEO, TVS Motor.

Meanwhile, The upcoming festive season, when the subdued demand is expected to pick up, is a litmus test. The Centre’s GST revamp will be a fillip. The GST rates on smaller cars (under 1,200cc) and two-wheelers are expected to be slashed from 28% to 18% ahead of Diwali. Coupled with the repo rate cuts, it is expected to drive customers to showrooms. According to a Motilal Oswal report, the demand for electric two-wheelers is here to stay, amid rising interest from rural and traditional customers. Automakers are buoyant about the festive season and do not see a prolonged clampdown. The warming relationship between India and China, in the aftermath of the Trump administration’s reciprocal tariff tactics, and Prime Minister Narendra Modi’s assurance of working towards building national capacity in critical minerals have further boosted the sector’s morale.

Rare-earth crisis

Rare-earth squeeze: Choked supply chains force automakers to explore alternatives