As reported in recent CNBC coverage, India’s automotive sector is bracing for potential production delays as a global shortage of rare earth magnets, critical for both electric vehicles (EVs) and traditional internal combustion engine (ICE) vehicles, has begun to put a strain on supply chains. China has control over 90% of the global supply of rare earth materials. The country’s priorities are European automakers like Volkswagen and Stellantis. India’s auto companies are yet to receive sufficient supplies. The negotiations are slow due to geopolitical issues and bureaucracy.
The impact will show in the EV and ICE vehicle sector as they rely to a great extent on rare earth magnets. Manufacturers and dealerships have 4-6 weeks (OEM level) and 52-53 days (dealership level) worth of parts in stock at the moment. The stockpile is expected to last till mid to end August, covering the industry through the low sales season. If the issue remains unresolved, vehicle shortages could begin in September, India’s festive season, usually the peak of sales for the auto sector.
These rare earth elements are not exactly rare; it's just that extracting and processing them is difficult and expensive. China dominates the sector as it has already invested heavily in this complex supply chain. 2025 was expected to be a major year for EVs; the expectations now have to be corrected to 2026. This is when major automakers like Tata, Hyundai, Mahindra, and Maruti will have affordable EVs available.
