Ola Electric, Bajaj Auto, Tata Motors Shares Soar Upto 9% Amid India-China Talks Over Rare Earth Magnet Supply

Shares of Indian auto manufacturers extended their rally on August 19, this time getting a boost from reports that China has agreed to address India’s concerns over the supply of rare earth magnets, a critical input for automakers and tunnel boring machines.

According to CNBC-TV18, China’s foreign minister, currently in India for talks, assured New Delhi that Beijing would work to ease the supply bottlenecks. The assurance comes as a relief for the industry, which depends heavily on China, the source of about 90% of global production of rare earth magnets.

The Nifty Auto index was up over 1% by mid-day, with Bajaj Auto, Hero MotoCorp, TVS Motor, Tata Motors and Maruti Suzuki gaining 1–3%, extending their gains from the previous session. Ola Electric was the biggest winner, with a surge of around 9%.

The shortage of rare earth magnets has been eating into the prospects for automakers. Bajaj Auto slashed production of its electric two-wheelers by nearly 50% in July and warned that volumes in August and September would also remain constrained too.

Hero MotoCorp, also echoed a similar view when it flagged the challenge in its Q1 earnings call. That said, Hero Moto also revealed that it had secured enough supplies to cover both its internal combustion engine and EV models through the second quarter. It added that while critical components such as EV motors and wheel sensors remain heavily dependent on rare earth magnets, the company is exploring long-term alternatives.

Tata Motors, India’s largest EV player, also acknowledged rare earths as a potential choke point. While its operations have not yet been disrupted, the company is already working on diversifying supply sources.

If Beijing’s assurances translate into action, automakers could see much-needed relief from supply disruptions that have threatened production schedules.

The talks around easing rare earth constraints also coincide with another major tailwind for the industry: Prime Minister Narendra Modi’s proposed GST rationalisation. The plan to simplify tax slabs from four tiers to two has stoked expectations of lower levies on passenger vehicles and two-wheelers, positioning the auto sector as one of the biggest potential beneficiaries. Together, the rare earth breakthrough and hopes of tax cuts have reinforced optimism over a demand revival in the sector.