Rare earth magnets are a core component of the electric vehicle (EV) industry, providing high torque and high energy efficiency for permanent magnet synchronous motors. However, the global rare earth market is dominated by China, and India, despite having the world’s third-largest rare earth reserves, is highly dependent on Chinese imports due to underinvestment and a weak supply chain. In early 2025, China’s export restrictions on Indian rare earth magnets led to a crisis of production delays and rising costs for India’s electric vehicle and two-wheeler industries. This article analyzes the causes, impacts, and solutions of this crisis and explores how India can respond to this geopolitical and economic challenge at the policy and industry levels.
H2: Crisis status: How important are rare earth magnets?
Rare earth magnets are indispensable in electric vehicles, and their high performance directly determines the efficiency of the motor and the competitiveness of the vehicle. However, China’s global monopoly on rare earths makes the Indian supply chain extremely vulnerable. In 2025, China’s refusal to export rare earth magnets to India hampered the production plans of Indian electric vehicle manufacturers. Although India has abundant rare earth reserves, it lacks refining technology and large-scale production capabilities, and mining and processing are expensive. At the same time, China’s subsidy policy and economies of scale make its rare earth prices more competitive, making it difficult for Indian companies to compete.
The Indian government’s long-term mistakes in its critical mineral strategy have exacerbated the crisis. Similar to semiconductors and active pharmaceutical ingredients (APIs), the fragility of the rare earth supply chain exposes India’s strategic dependence on China. Some commentators even called this a “shame of policy failure,” pointing out the government’s slackness in areas related to national security.
H2: Industry shock: Are electric vehicles going to increase in price?
China’s export restrictions have directly “put the brakes” on India’s electric vehicle and two-wheeler production. The industry estimates that production will be delayed by 2-6 months, and costs will increase by 5-8%. For example, the price of an electric scooter with a price of 160,000 rupees may jump directly to 170,000-180,000 rupees. Two-wheelers are the “pillar” of India’s electric vehicle market, accounting for more than 70% of sales. This wave of price increases is not a trivial matter for ordinary consumers. Not to mention that India’s ambitious goal of popularizing electric vehicles by 2030 now looks like a “distant dream.”
H2: Where is the way out?
Some people in the industry are also thinking of ways. Companies such as Attero have demonstrated the ability to extract 97% pure rare earth and battery materials from waste, which could theoretically meet 80-90% of India’s rare earth needs. The government should accelerate the establishment of world-leading recycling centers through tax incentives and infrastructure investment. Some people also mentioned hybrid vehicles as a suitable transition technology. Hybrid vehicles can ease the pressure caused by rare earth shortages while providing consumers with a more economical choice.
The environmental issues of rare earth mining have been hyped up by activists, but India already has more polluting industries (such as chemicals and coal) that are still thriving. Commentators pointed out that “Chernobyl can be turned green,” indicating that environmental restoration technology is mature enough. The Indian government’s ability to promote major projects with a tough attitude is enough to cope with the resistance of activists. To ease the concerns of local residents, the government can optimize land use and reduce social conflicts by providing modern resettlement solutions such as apartments.
H2: Ending: Can India turn the tables?
India’s rare earth magnet crisis exposes its vulnerability in the electric vehicle supply chain and threatens the 2030 electric vehicle popularization goal. In the short term, India should ease the crisis by recycling and promoting hybrid vehicles; in the long term, investing in local supply chains and international cooperation is the only way to achieve self-sufficiency. The government must face up to policy mistakes, abandon excessive concerns about environmental disputes, and follow China’s example of promoting the rare earth industry with a national strategy.