Crisil Ratings reports China rare earth curbs pose supply risk to India EV push
By Anjali Sharma
WASHINGTON – According to a report by Crisil Ratings on Sunday the India’s electric vehicle ambitions may face a critical supply-side hurdle due to China’s tightening grip on rare earth magnet exports.
The agency warned that ongoing delays in shipment approvals and export clearances from China could disrupt automotive production and delay upcoming EV launches if the situation persists beyond a month
Rare earth magnets, essential components in permanent magnet synchronous motors used in EVs and hybrid vehicles, have become a bottleneck in global supply chains after China’s recent policy changes. The magnets are also used in internal combustion engine vehicles, though in a limited capacity, primarily in electric power steering and motorized systems, it stated.
Crisil highlighted that India imported over 540 tonnes of these magnets in FY24, with more than 80% sourced from China.
In April 2025, China mandated export licenses for seven rare earth elements and related magnetic products, with stringent conditions including detailed end-use disclosures and assurances that the goods will not be used in defence or re-exported to the United States.
“With the clearance process taking at least 45 days, this added scrutiny has significantly delayed approvals,” Crisil said.
“The growing backlog has further slowed clearances, tightening global supply chains.”
Crisil noted that as of end-May 2025, 30 import requests from Indian companies had been endorsed by the Indian government. However, none had received approval from Chinese authorities, and no shipments had arrived.
The most automakers have 4 to 6 weeks of inventory prolonged delays could start affecting production lines by July 2025. This may lead to deferrals or rescheduling of EV model launches.
Crisil warned of a spillover effect on two-wheelers (2Ws) and ICE passenger vehicles if the bottlenecks continue for an extended period.
According to Crisil forecast, domestic passenger vehicle sales are expected to grow by 2-4% in FY26.
The electric passenger vehicle volumes could grow by 35-40%, and electric 2W sales by 27%, outpacing overall 2W growth of 8-10%. But supply tightness could soften this momentum.
Both the Indian government and industry stakeholders are pursuing short- and long-term mitigation strategies.
The agency said that these include building strategic inventories, sourcing from alternative suppliers, and accelerating domestic manufacturing under the Production Linked Incentive scheme.
Long-term efforts focus on developing local rare earth exploration, refining, and recycling capacities.
China accounts for over 90% of the global rare earth magnet production capacity, creating a strategic vulnerability for multiple industries including automobiles, clean energy, and electronics. Outside China, global supply options remain limited, it concluded.
