India Considers Easing EV Localisation Requirements Amid China's Rare Earth Export Curbs

New Delhi, Jun 14 (KNN) India is evaluating a potential relaxation of its stringent 50 percent localisation requirement for electric vehicle manufacturers and suppliers, following China's recent restrictions on rare earth exports, according to sources familiar with the matter who spoke to Bloomberg. 

The deliberations come as the automotive industry faces significant supply chain disruptions that threaten to undermine the country's domestic manufacturing objectives.

Industry representatives have raised concerns about the localisation thresholds during government consultations, though the Society of Indian Automobile Manufacturers has not yet formally requested a reduction in the requirement. 

The discussions remain private, with sources requesting anonymity due to the sensitive nature of the ongoing deliberations.

China, which dominates the global rare earth minerals market, implemented export restrictions in April targeting these critical materials essential for producing permanent magnets used in electric vehicle traction motors. 

The curbs have created substantial challenges for India's localisation goals under the Production Linked Incentive scheme, which provides financial incentives to promote domestic manufacturing capabilities.

The government has reportedly advised automakers to temporarily import fully-built traction motors or their sub-assemblies as a workaround to address supply bottlenecks. 

The Ministry of Heavy Industries has not issued public comments regarding the situation or potential policy adjustments.

Manufacturers and suppliers are actively seeking alternative supply sources and implementing costly temporary solutions to maintain production schedules. 

However, industry stakeholders warn that prolonged disruptions in rare earth material availability could severely compromise automakers' ability to meet localisation mandates required under the PLI scheme.

The PLI program represents a cornerstone of the government's broader strategy to reduce import dependency across critical sectors, including electronics, textiles, semiconductors, and electric vehicles. 

The initiative aims to strengthen domestic manufacturing capabilities and promote self-reliance in key industries.

China's control over rare earth supply chains has left Indian original equipment manufacturers with limited alternatives for sourcing these essential materials. 

Some automakers are reportedly exploring direct imports of fully assembled motors or critical sub-assemblies from China to ensure production continuity while navigating the current supply constraints.

Any decision to soften localisation requirements would provide immediate relief to electric vehicle manufacturers facing production challenges. 

However, such measures would also highlight India's continued dependence on critical materials from China and underscore the urgent need to develop more resilient and domestically-focused supply chains for the long-term sustainability of the country's electric vehicle manufacturing sector.

(KNN Bureau)