China Begins Issuing Rare-Earth Magnet Export License to India, Offers Relief to Auto Industry

China has begun issuing licences to import rare-earth magnets (REMs) into India, offering some relief to Indian automobile and electronics manufacturers who have been facing supply disruptions for months.

According to government officials cited by Business Standard, the approvals are being granted to a limited set of companies, including Jay Ushin, Indian units of German auto parts maker Continental AG, and suppliers linked to major vehicle manufacturers such as Mahindra, Maruti Suzuki, and Honda Scooters and Motorcycles.

China controls a large share (90%) of the world’s production of rare-earth magnets, which are essential components used in automobiles, electric vehicles (EVs), electronics, medical equipment and defence systems.

The magnets have been under strict export controls since April 4, following China’s decision to tighten licensing norms in response to higher tariffs imposed by the United States on Chinese goods.

The restrictions have had a global impact, including on India’s manufacturing sector. Under the current rules, Chinese exporters can receive clearance only if Indian importers provide assurances that the materials will not be used for defence or other dual-use purposes. Officials said the approval process remains complex and time-consuming.

Earlier, Indian automobile manufacturers had flagged serious concerns, warning the government that delays in processing applications for critical raw material shipments from China’s Ministry of Commerce were affecting production schedules, especially for electric vehicles.

Over the past six months, Indian authorities have been engaging with their Chinese counterparts to speed up the approvals for these raw material shipments. Previous reports indicated that in June, the Indian government facilitated discussions between Indian auto companies and China’s commerce ministry in Beijing. Indian officials from the Ministries of Heavy Industries, External Affairs, and Commerce and Industry were involved.

Additionally, a 50-member delegation, representing original equipment manufacturers (OEMs), Society of Indian Automobile Manufacturers (SIAM), and Automotive Component Manufacturers Association of India (ACMA) had reportedly planned to visit China in early June first week, but that did not work out.

Government officials told Business Standard that despite delays and uncertainty, the industry has so far managed to maintain production by finding alternative ways to cope with supply constraints.

However, they added that the real impact will depend on how many more approvals China grants and how quickly. A broader easing of restrictions could significantly reduce supply-chain risks for India’s automobile and EV manufacturers.