Rare Earth: How India's automakers are reducing their dependence on China

In the 20th century, oil emerged as the most critical commodity, reshaping geopolitics. Nations with vast oil reserves gained unprecedented economic and political influence. In the 21st century, rare earths are set to replace oil, driving the next wave of economic and geopolitical shifts. The reason: these 17 elements are indispensable to modern technologies such as smartphones, wind turbines, defence systems, and satellites. They are also the heart of the automotive industry as it moves towards electrification (they are used in high-performance magnets in EV motors and are crucial for its torque and energy efficiency).

However, as shortage of rare earth magnets due to China’s export restrictions turns into a full-blown crisis, the global automotive industry, including domestic players, is looking at options. One of the things it has zeroed in on is ferrite magnets. Can these low-cost, non-conductive permanent magnets support the future of electric mobility?  

Substituting Rare Earths

In 2010, the global auto industry had faced a similar crisis when China cut its rare earth export quota by 40%, slashing exports from 50,000 tonnes in 2009 to about 30,259 tonnes. This drove up prices nearly sevenfold and ignited a global rush to develop rare earth mining and processing projects.

In April this year, the world faced a similar crisis when China imposed export restrictions in response to import tariffs by US President Donald Trump. The restrictions covered seven of the 17 elements—samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium.

This has shaken up domestic players such as Bajaj Auto, Ather Energy, and TVS Motor, who anticipate that the shortage of rare earth magnets will hit EV production. Rating agency Crisil expects EV sales growth (expected 35-40%) to taper off. The panic was clearly visible in August. As per the Vahan data, Bajaj Auto slipped to the fifth position among electric two-wheeler manufacturers. Sales of the company’s Chetak Electric Scooter and GoGo three-wheeler slumped to 8,940 units compared to 24,510 units in April.

China, however, eased some restrictions on India in August after its top officialds met External Affairs Minister S. Jaishankar in Beijing. The situation, however, remains precarious, forcing automakers to pivot to alternatives. Some are looking at ferrite magnets as a long-term option. For example, two-wheeler manufacturer Ola Electric, in a letter to shareholders after the Q1FY26 results said the company has been working on using ferrite magnets for two years.

Mahindra & Mahindra, whose BE.6 and XEV.9E SUVs hit the market recently, has adopted a similar approach. Rajesh Jejurikar, ED & CEO-Auto & Farm, Mahindra & Mahindra, said at a recent press conference that the SUV manufacturer is comfortably covered for the next two quarters as it substituted rare earth with ferrite magnets. “There has been no disruption in production. We are covered for the coming quarter and the next quarter. We have taken a number of steps such as substituting rare earth magnets with ferrite magnets,” he said. According the International Market Analysis, Research and Consulting Group, the domestic ferrite magnet market was 61,650 tonnnes in 2024; it is expected to reach 74,840 tonnes by 2033.

Notably, amidst the crisis, several original equipment manufacturers (OEMs) have started working towards rare earth magnet-free motors. US-based start-up Conifer.io and homegrown Sterling GTake Mobility plan to introduce a ferrite magnet motor in the next few quarters.

“Rare earths are the new oil. We can’t electrify the world using globally constrained materials. That’s why we took a rare earth-agnostic approach,” says Ankit Somani, Co-founder, Conifer.io. The company is in talks with 13 domestic automobile manufacturers for supplying ferrite magnet motors.

Jaideep Wadhwa, Managing Director, Sterling GTake Electric Mobility, a subsidiary of Sterling Tools Ltd, says the challenge isn’t building a motor without rare earths, it’s in meeting the performance and size expectations without them. The company will manufacture magnet free motors at its Faridabad plant and plans to start supplying OEMs in the next 18-20 months. “We are currently engaged with customers across two-wheeler, four-wheeler, and commercial vehicle segments. Our focus is auto and EVs but we’re open to aerospace and industrial applications as well,” says Wadhwa.

Conifer.io plans to make ferrite magnet motors available to OEMs by the next quarter. “We buy ferrite magnets off the shelf. We use magnets which are 86% rust-free. We have a 100% localised supply chain in India across magnets,” says Somani.

Bringing Ferrite

The renewed interest in ferrite magnets may seem surprising at first. They have been around for decades and were widely used in various applications but were largely overshadowed by neodymium magnets. Considering recent disruptions in rare earth supply chains and rising costs, they are being rediscovered owing to their affordability, abundance, and independence from geopolitically sensitive materials. “The global ferrite magnet production is 5–10x that of neodymium. They’re a commodity now,” says Somani.

Compared to neodymium-based magnets, ferrite magnets are cheaper too. Somani says ferrite magnets cost $5 per kg, while those made of neodymium cost $60 to $100. Ferrites are cheaper than even copper, which is around $11 per kg.

Another equally compelling driver is the pursuit of more sustainable alternatives. “These rare earths are very often found alongside low-grade radioactive elements such as thorium. And therefore, their mining leads to the creation of radioactive tailings,” says Sterling GTake’s Wadhwa.

“If you’re committed to green technology, there’s a clear dichotomy: on the one side, we reduce tailpipe emissions, but on the other, we create environmental hazards through rare earth mining and refining. That contradiction was something we wanted to address,” he adds.

Rise of Induction Magnets

A number of automakers are also exploring technologies that don’t depend on permanent magnets. Jitin Makkar, Senior Vice President and Group Head at rating agency ICRA, says certain OEMs are exploring induction motors in place of permanent magnet motors.

“This is not a reaction to what’s been happening in rare earth metals. This was anyway happening. So, that’s one technology. Globally, material science research keeps happening and companies keep trying to explore multiple materials. They are exploring certain materials that have the same properties,” says Makkar.

However, even if rare earth-free materials prove viable, OEMs will have go through full validation and testing cycles. “Some may already be working on this as a contingency but their progress isn’t publicly known,” says Makkar.

Becoming Self-Reliant

According to PIB, India’s imports of permanent magnets jumped from 1,945 tonnes in FY23 to 2,270 tonnes in FY24. About 52 India-based companies depend on Chinese magnets for supplying to automobile manufacturers.

China accounted for 69% of total mine production of rare earths in 2024 at 2,70,000 tonnes. It is followed by the US (12%), and Myanmar (8%).

Amidst the increase in dependency on China, the Ministry of Heavy Industries has proposed a rare earth magnet processing scheme for inter-ministerial consultations to strengthening domestic manufacturing and cut down reliance on imports for key components.

“We have floated the rare earth magnet processing scheme for inter-ministerial consultations,” says Kamran Rizvi, Secretary, Ministry of Heavy Industries. The proposed financial allocation is Rs 1,345 crore.

Additionally, companies such as Sterling GTake plan to export ferrite magnet motors globally. “Between AEM and us, we want to be globally competitive. As opportunities open, we hope to leverage Indian competitiveness to build export markets too,” says Wadhwa.

With India targeting 30% EV penetration by 2030, ICRA’s Makkar says the industry will find an engineering workaround to make sure that these supply chain-related fracture points do not come in the way of electrification.

“It remains to be seen whether this is a temporary disruption or a sign of deeper, long-term issues. If it’s just short-term posturing, the momentum behind India’s EV transition is unlikely to be affected. But if the challenge persists and becomes more chronic, it could pose some roadblocks. That said, the industry has invested significantly, and we believe creative and engineering workarounds will emerge to ensure that supply chain fractures don’t derail the larger trajectory,” says Makkar.

Yet, even as domestic OEMs pursue sustainable, long-term alternatives, the undeniable reality remains: China continues to hold a firm grip on the global critical minerals supply chain.

As India races toward its EV ambitions, the rare earth magnet crisis underscores a crucial inflection point for the industry.

While short-term disruptions have prompted immediate engineering pivots—like ferrite and induction-based alternatives—broader challenges remain. For domestic automakers, start-ups, and policymakers, this moment is as much about innovation as it is about resilience.

@OrielAstha11