China's Rare Earth Export Restrictions Show Limited Impact On India's Auto Sector: Nuvama

New Delhi, Jun 18 (KNN) India's automotive sector faces minimal disruption from China's recent restrictions on rare earth magnet exports, with over 95 percent of vehicles in the country operating on internal combustion engines, according to a Nuvama report.

The analysis indicates that electric vehicles, hybrid passenger vehicles, and electric two-wheelers will bear the primary impact of the rare earth materials limitations.

The report identifies electric passenger vehicles as facing the greatest impact from the restrictions, followed by hybrid passenger vehicles and electric two-wheelers in descending order of severity.

Conventional internal combustion engine vehicles will experience the least disruption due to their minimal reliance on rare earth materials.

Electric vehicle adoption in India remains in early stages, with market penetration at seven percent for two-wheelers and three percent for passenger vehicles.

Despite electric vehicle sales recording a robust compound annual growth rate of 25 percent between fiscal years 2023 and 2025, this growth occurs from a relatively small base, limiting the overall impact on India's automotive sector even if sales experience decline.

The disparity in impact stems from the varying usage of rare earth materials across vehicle types. Electric vehicles require approximately 0.8 kilograms of rare earth materials per unit, while hybrid vehicles use 0.5 kilograms and internal combustion engine vehicles need only 0.1 kilograms.

Most electric vehicles utilize Permanent Magnet Synchronous Motors, which depend on rare earth materials to maintain stable magnetic fields, particularly under high-temperature conditions.

China implemented export restrictions in April on seven critical rare earth elements: samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium.

These materials serve as essential components in manufacturing magnets such as neodymium iron boron and samarium-cobalt, which find applications across various sectors including electric vehicles.

China maintains control over more than 90 percent of global rare earth element processing, providing the country with substantial influence over worldwide rare earth materials supply chains.

While the restrictions primarily target the defence sector, their effects will extend across automotive, industrial, and aerospace industries.

Automotive manufacturers must now obtain end-user certification from the Chinese government to continue sourcing these materials, with the approval process expected to require approximately 45 days.

The certification requirement represents an additional administrative step that could affect supply chain planning and procurement timelines for affected manufacturers.

(KNN Bureau)