Rare Earth Magnet: Supply disruptions will affect passenger vehicle production, companies have this much stock

Disruptions in the supply of rare earth magnets from China for over a month may impact the production of passenger vehicles, including electric ones. This could slow the pace of the domestic automobile industry.

According to a report by Crisil Ratings, most vehicle manufacturers currently have only four to six weeks of inventory. In such a scenario, a prolonged delay in the supply of magnets may compel companies to postpone the production of EV models starting in July. If supply constraints continue for an extended period, it may have a more significant impact on two-wheelers and internal combustion engine (ICE) passenger vehicles. Moreover, this crucial low-cost magnet poses a risk to the domestic automobile sector. The shortage of rare earth magnet supply has emerged at a time when the auto sector is gearing up to accelerate the push for electric vehicles (EVs). Companies plan to launch more than a dozen new EV models soon.

India imported 540 tonnes of magnets in the last fiscal year, with over 80 percent coming from China. By the end of May, about 30 import requests from Indian companies had received approval from the Indian government. However, so far, Chinese authorities have not granted permission to any of these requests.

Crisil Ratings director Poonam Upadhyay stated that this shortage of magnets is forcing automakers to reevaluate their supply chain strategies. Despite accounting for less than 5 percent of the vehicle's cost, these magnets are crucial for EV motors and electric steering systems. To mitigate potential issues, automakers are actively working with alternative suppliers in countries such as Vietnam, Indonesia, Japan, Australia, and the US.