Sona Comstar to produce magnets domestically amidst China's export restrictions

Gurgaon-based Sona Comstar, officially known as Sona BLW Precision Forgings, is set to become the first Indian company to produce rare earth magnets domestically. This decision follows recent export restrictions imposed by China, which currently dominates global magnet production, supplying 90% of the world's rare earth magnets. Sona Comstar's move aligns with the Indian government's push to enhance self-sufficiency in critical components used in electric vehicles (EVs) and reduce dependence on Chinese imports.

Vivek Vikram Singh, CEO of Sona Comstar, emphasised the significance of this shift, stating, "Being the largest importer of rare earth magnets, we are the single largest affected party in the country. We have to look at India's self-sufficiency on magnets and are working with the government on it." The company imported 120 metric tonnes of magnets from China in the previous financial year. Singh revealed that they are assessing potential government incentives and other factors before finalising the investment for local manufacturing, as the company has the necessary funds, driven by its revenue, which has surged five-fold to over $400 million in five years.

Sona Comstar is a key supplier of gears and motors to automotive giants such as Tesla and Stellantis. The company has plans to import 200 tonnes of magnets this year to cater to its expanding EV customer base, which constitutes approximately one-third of its revenue. The company's strategic shift comes amidst India's efforts to leverage its fifth-largest reserves of rare earths globally, fostering local production.

Despite China's new export restrictions, a recent agreement between the U.S. and China aims to expedite rare earth exports. However, industries worldwide, including India, are keen on alternatives. With India housing the world's third-largest car market, plans to mine and process rare earths locally promise long-term benefits but require years of development. Meanwhile, Sona Comstar's diversification, including the acquisition of the Indian railways business of Escorts Kubota, will see an increased focus on domestic revenue this year. Currently, the U.S. accounts for 40% of the company's revenue, ahead of India and Europe.

The company's growth trajectory remains robust despite the recent passing of its chairman, Sunjay Kapur, which led to concerns over potential disruptions. Jeffrey Mark Overly has been appointed as the new chairman. Singh, however, assured stakeholders that the company's operations remain unaffected, asserting, "This will not change the company's course as it is run by a professional team of executives and has the kind of 'management bench strength' needed to overcome crises and disruptions." This confidence underscores Sona Comstar's commitment to maintaining its strategic direction and expansion objectives.

Sona Comstar is exploring opportunities to capture more market share in China, Japan, and South Korea, amidst its proactive domestic initiatives. As the Indian government finalises incentives for local magnet production, the company stands poised to transition from being the largest importer to a key domestic manufacturer. This strategy not only supports India's self-reliance goals but also enhances Sona Comstar's competitive positioning in the global market.