How Chinas rare earth export controls slammed the brakes on India’s EV majors

• • e-scooters were 60% of Indias nearly 2 million EV sales in FY25

• • India depends on China for around 85-88% of REM imports

In April 2025, China put rare earth elements (REEs) and rare-earth permanent magnets (REMs) on its export control list, thereby triggering disruptions for Indian automotive companies and original equipment manufacturers (OEMs) dependent on imports of REMs for the production of electric vehicles (EVs). Although China announced a one-year pause on exports, effective from 10 November 2025, the seven-month ban impacted operations of leading Indian auto and auto-component manufacturers.

China has since stiffened the compliance burden for foreign manufacturers, specifically as regards licenses to export parts, components and assemblies containing Chinese-sourced rare earth materials, or produced using Chinese processing technologies.

REMs have either neodymium-iron-boron (NdFeB) or samarium-cobalt (SmCo) used in EV motors. Heavy REE magnets are almost 30% lighter than ferrite-magnet batteries, and preferred for their higher efficiencies and smaller size.

Between FY23-25, India imported 59,393 tonnes (t) of non-metallic permanent magnets from China, which was 85% of total imports. Again, India imported 45,932 t of metallic permanent magnets from China during the same period, which was around 88% of total imports.

Impact on leading auto players:

Among the domestic auto majors, Bajaj Auto was the worst affected with EVs contributing 20% of its domestic revenue. The company manufactures electric two-wheelers (E2W) under the Chetak brand, and electric autos (e-autos). In April, TVS Motor overtook Bajaj to emerge as market leader in the E2W segment. TVS manufactures the iQube series of E2Ws, and also competes in the e-autos segment.

Bajaj sounded the alarm in May during its Q4FY25 earnings call, with Rakesh Sharma, executive director of the company, declaring it would impact Chetaks operations by July. REMs are an essential component of high-performance EV motors, he noted.

However, supply disruptions were felt even before July. Non-availability has begun to compromise production in June itself, resulting in some shortfalls in deliveries to dealers in June, Sharma had noted during Bajajs Q1FY26 earnings call, adding July has seen a 50% shortfall. While we expect production in August to be better than July, we may still see a shortfall of similar levels of 50% in this quarter in Chetak, and about 25% to 30% or so in e-autos.

By October, supply chain constraints resulted in an almost 50% shortfall for Bajaj Auto, forcing the company to move to light REE-based components and ferrite-based products for EV motors, as well as explore alternate geographic sources. While Bajaj Auto got the top spot in E2W in October, TVS reclaimed market leadership in November.

In effect, TVS has dominated the E2W segment for seven of the eight months in FY26. However, it still acknowledged the problem spurred by export controls in China at its annual general meeting (AGM) in August. We are working on reducing concentrations, and keeping multiple suppliers, so that we can create a resilient and robust supply chain, Sudarshan Venu, managing director, TVS Motor, told investors.

So far in FY26, TVS has re-sized higher-sized magnets that are available in India. On a medium- and long-term basis, we are working on HRE-free, ferrite-based, magnet-free (apart from) looking at alternate countries, KN Radhakrishnan, CEO of TVS Motor Company, told analysts in April about de-risking supplies from China.

Hero MotoCorp, the market leader in two-wheelers that run on internal combustion engines (ICE), also felt the heat. Rare-earth metal is an industry-wide phenomenon. It is a challenge, said Vikram Kasbekar, acting CEO of Hero MotoCorp, during the companys earnings call for Q1FY26 in early August.

Permanent magnets are required in key components like the EV motor, and speed sensors of two-wheelers both ICE and EVs, he pointed out. Hero launched its electric scooter, Vida, in October 2022, and is the largest investor in the E2W company Ather Energy.

During an April earnings call, Tarun Mehta, co-founder and CEO of Ather Energy, Indias oldest E2W manufacturer, noted, Either an EV manufacturer in India partly assembles motors in China, and doesn’t import magnets. Or, it should move production to heavy rare earth free magnets (out of China). Or, move away from rare earth of any category to ferrite. In our case, we are exploring all options.

Mehta again acknowledged in November that Ather had to change our supply chain. Most EV players are actually having supply crunch (because of) the rare earth crisis.

E2W were around 60% of Indias EV sales of nearly 2 million units in FY25. Overall EV sales, which grew 17% in FY25, comprised 1.2 million E2Ws, and 700,000 electric three-wheelers. The remaining were electric passenger vehicles.

For the electric passenger vehicles segment, Tata Motors Shailesh Chandra, managing director of Tata Motors Passenger Vehicles, told in August: We have created alternatives to deal with the situation. It means alternative sourcing from beyond China, but also seeing wherever possible we can avoid rare earth.

How were OEMs affected?

Amit Kalyani, vice-chairman and joint MD of auto components manufacturer Bharat Forge said in August that there were challenges for everyone in EV because no permanent magnets were locally available.

While Sona BLW Precision Forgings felt the impact of HRE magnet shortage for production of EV traction motors in Q1FY26, it responded by developing an alternative motor for manufacturers. We shifted to alternative motor designs that do not rely on heavy rare-earth magnets. We now manufacture our motors using light rare-earth magnets, informed Vivek Vikram Singh, MD and group CEO of the auto-components supplier.

In Q2FY26, Sona BLW developed, tested, and validated a rare-earth-free ferrite assisted synchronous reluctance motor for electric three-wheelers and light commercial vehicles. An important innovation in this product removes the last bit of REM, which is part of the rotor position sensor. The sensor, based on the induction principle with copper coils, delivers the same performance and can be applied across other motor technologies, explained Praveen Rao, chief technology officer (CTO) of the company.