Indian Electric Vehicle Industry Faces Challenges Amid Delays in Beijing’s Rare Earth Magnet Supply
India’s automotive sector faces potential challenges as Crisil Ratings warns that China’s recent restrictions on rare earth magnet exports could hinder electric vehicle (EV) production. The rating agency highlighted that delays in shipments and stringent control measures from Beijing may disrupt the supply chain, affecting the launch and production timelines of new EV models. With India heavily reliant on China for these critical components, the situation could significantly impact the growth trajectory of the country’s electric vehicle market.
Impact of China’s Export Restrictions
Crisil Ratings has raised alarms regarding the implications of China’s export restrictions on rare earth elements, which were enacted in April 2025. These restrictions require detailed end-use declarations and prohibit the re-export of materials linked to defense or the United States. As a result, the clearance process for shipments has become more stringent, leading to delays and a growing backlog. The report indicates that the clearance process now takes at least 45 days, which has compounded the delays in approvals and tightened global supply chains.
India, which imported over 80% of its rare earth magnets from China last fiscal year, is already feeling the effects. By the end of May, Indian companies had submitted around 30 import requests, but none had received approval from Chinese authorities, leaving shipments stalled. Anuj Sethi, a senior director at Crisil Ratings, noted that the timing of these supply constraints is particularly concerning as the auto sector gears up for aggressive EV rollouts. With over a dozen new electric models planned for launch, many of which rely on permanent magnet synchronous motors (PMSMs), prolonged delays could lead to production setbacks starting in July 2025.
Current Inventory and Future Projections
Despite the looming challenges, the Indian automotive industry has managed to maintain a buffer, with most automakers currently holding 4 to 6 weeks of inventory. However, if the supply chain disruptions persist, this could lead to significant production delays for electric vehicle models. Crisil forecasts that passenger vehicle volumes may grow by 2 to 4% in FY26, while electric vehicles are expected to see a substantial increase of 35 to 40%. Electric two-wheelers are projected to expand by 27%, outpacing the overall growth of the two-wheeler segment, which is estimated at 8 to 10%. Nevertheless, these optimistic projections could be jeopardized if supply constraints worsen further.
The potential impact of these delays is not limited to electric vehicles alone. The broader automotive sector, including two-wheelers and internal combustion engine vehicles, may also face repercussions if the supply bottlenecks continue for an extended period. The situation underscores the critical need for the industry to adapt quickly to changing supply dynamics and explore alternative solutions.
India’s Response to Supply Chain Challenges
In response to the challenges posed by China’s export restrictions, the Indian government and automakers are implementing a dual strategy. In the short term, they are focusing on building strategic inventories, seeking alternative suppliers, and enhancing domestic assembly capabilities under the Production Linked Incentive (PLI) scheme. Long-term strategies include reducing import dependency by accelerating rare earth exploration, developing local processing capabilities, and investing in recycling initiatives.
Diplomatically, India has initiated direct communication with Beijing to stabilize supply flows. Randhir Jaiswal, spokesperson for the Ministry of External Affairs, emphasized the importance of maintaining predictable supply chains in trade. Meanwhile, Commerce and Industry Minister Piyush Goyal described China’s export restrictions as a “wake-up call” for the global market. He highlighted India’s commitment to developing alternative supply chains and positioning itself as a reliable partner for businesses seeking to reduce reliance on China.
Additionally, India is exploring collaborative opportunities with Central Asian nations to jointly investigate rare earths and critical minerals. This initiative aims to create a longer-term buffer against global supply shocks and diversify sources of these essential materials, which are vital not only for electric vehicles but also for various sectors, including home appliances and renewable energy.
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