EV Localisation in Focus: Govt Asks 2&3 Wheeler Automakers to Declare Self-Sufficiency in Rare Earths

The Ministry of Heavy Industries (MHI) has asked the electric two-wheeler and three-wheeler manufacturers in the country, to declare that they have adequate rare earth magnet inventories and are locally producing key components like traction motors and electronic throttles, as required under the PM E-DRIVE scheme.

One of the key testing agencies under MHI, the Automotive Research Association of India (ARAI) issued a directive on Thursday instructing companies to sign a declaration which read that they hold sufficient stock of rare earth magnets and are adhering to the scheme’s phased manufacturing programme (PMP) norms, Business Standard reported.

This communication comes amid the industry’s growing concern regarding supply chain constraints, after China’s restriction on export of rare earth magnets – a critical input in the EV’s traction motors – in April this year.

According to the automakers, indigenisation of certain automobile parts is currently unviable and thereby they had been anticipating temporary relief from localisation rules. On March 3, a notification was issued specifying localisation milestones for two- and three-wheeler manufacturers seeking financial incentives under the PM E-DRIVE scheme. 

As per the scheme’s PMP norms, domestic manufacturing of multiple components, including traction motors and electronic throttles are mandatory for claiming subsidies. In case of traction motors, this includes coil winding, magnet fitment, rotor and stator assembly, shaft and bearing installation, enclosure fitment, and wiring - all of which is required to be done in India. 

However, industry representatives argue that those targets have become increasingly difficult to meet. Usually, traction motors require neodymium and dysprosium magnets -- rare earth materials which are exclusively imported from China. And now with Beijing restricting exports of raw magnets but not finished motors, domestic automobile makers say that it has become unfeasible to continue assembling traction motors locally. 

Additionally, manufacturers have requested the ministry to allow temporary imports of fully assembled motors without disqualifying them from incentives. But instead, they have been asked to return a signed statement that states: “We hereby declare that we have sufficient inventory of rare earth magnets, which is required for manufacturing of traction motor and electronic throttle.”

The declaration, accessed by Business Standard also mentions a commitment to adhere to PMP guidelines and a waiver of claims if any deviation is later discovered. It read, “We assure that we will follow motor and electronic throttle manufacturing process as per PMP requirements mentioned in the notification... and we will not claim any demand incentive... in case we deviate.”

The letter further stated that companies should notify the relevant testing agency as well as the ministry if any change in their localization status is noted. It also warns if the PMP requirements are violated then it would make their monetary claims ineligible. A senior executive at an EV manufacturer told BS that it is difficult to understand the expectation of local magnet fitment when the primary raw material -- rare earth magnets -- is currently inaccessible. “This is not a question of willingness to localise, but rather a matter of practical feasibility under current circumstances,” he added.

As the rare earth crunch intensifies, both traction motors and electronic throttles that are critical to electric vehicle functionality are particularly getting more vulnerable to supply chain. Most of the major two- and three-wheeler makers participating in the scheme have not commented on the issue yet.