Global automakers are racing to secure critical rare earth materials ahead of China’s looming export restrictions, fearing a repeat of past shortages that hampered production lines.
Industry executives have warned that the upcoming curbs, set to take effect on November 8, could trigger severe parts shortages and even factory shutdowns.
Rare earth magnets are vital for a wide range of car components, including side mirrors, oil pumps, windshield wipers, and braking sensors, and are indispensable in electric vehicles.
Earlier supply disruptions depleted stockpiles, and companies are now facing tighter export licensing rules from Beijing, which has expanded its control over the sector.
China dominates 70 per cent of global rare-earth mining, 85 per cent of refining, and 90 per cent of alloy and magnet production, according to consultancy AlixPartners.
The new export control list includes elements such as ytterbium, holmium, and europium, all used in automotive manufacturing.
“The situation is very tense,” said Nadine Rajner, CEO of German metal-powder supplier NMD.
“Customers want to source rare earths from anywhere but China.” She noted that while countries like Sweden have reserves, they lack the mining and refining infrastructure to make them viable.
For heavy rare earths, China controls 99.8 per cent of global refining capacity, leaving few alternatives. “We are pretty much sold out and have limited stocks,” Rajner added.
To counter Beijing’s dominance, US President Donald Trump and Australian Prime Minister Anthony Albanese on Monday signed a critical minerals agreement that commits both nations to joint mining and processing ventures.
The pact includes a combined $3 billion investment and a price floor for critical minerals to support Western miners.
The White House said US investments would unlock $53 billion worth of deposits in Australia.
Trump declared on Monday that within a year the US would have “so much critical mineral and rare earths that you won’t know what to do with them,” although industry experts were skeptical of his timeline.
Mining analyst Dan Morgan of Barrenjoey said the prospect of new supply within a year was “heroic” and unrealistic, adding that most projects take five to seven years to come online.
China still accounts for 90 per cent of global refining capacity, 69 per cent of mining, and 98 per cent of magnet manufacturing, according to Goldman Sachs.
Bruno Gahery of Bosch said companies are “overstocking rare earths,” while a magnet supplier for Hyundai confirmed that inventories built earlier this year “have already been depleted.”
Shipments from China to Europe can take up to 45 days, and the industry is bracing for potential bottlenecks.
China has also tightened exports of lithium-ion batteries and related materials, compounding concerns over EV production.
An ongoing intellectual property dispute between China and the Netherlands involving chipmaker Nexperia has raised additional fears of supply disruptions.
Toyota’s North America purchasing vice president Ryan Grimm warned, “They can shut us down in two months, the entire auto industry.”
As the supply chain crisis deepens, automakers are turning to alternatives. Companies such as General Motors, ZF, BorgWarner, BMW, and Renault are developing electric motors that use little or no rare-earth content.
UK-based firm Monumo has helped clients cut rare earth use by an average of 24 per cent through AI-driven design.
Neutral, a Renault-backed recycler, currently extracts rare earths from 400,000 end-of-life cars annually in France but says scaling up remains a challenge. “The challenge is scaling up these activities,” said Neutral CEO Jean-Philippe Bahuaud.
Experts caution that both recycling and non-rare-earth motor technologies are still years away from large-scale deployment.
China’s ability to undercut global competitors on price remains a significant barrier. “The Chinese can always undercut them,” said Andy Leyland of SC Insights. “It’s a really risky investment.”
Jan Giese of rare-earth trader Tradium warned that the latest export measures were unlikely to be Beijing’s last. “This is not the end of export controls,” he said.
The US-Australia agreement, signed at the White House, aims to reduce that vulnerability.
Albanese called it an $8.5 billion pipeline “ready to go,” while both nations pledged $1 billion each over the next six months for joint projects.
In a boost to miners, the US Export-Import Bank issued seven Letters of Interest totaling more than $2.2 billion to Australian firms, including Arafura Rare Earths.
Arafura CEO Daryl Cuzzubbo said the company needs $800 million in equity funding to develop its Nolans project, with 60 per cent expected from cornerstone investors by year-end. Production is targeted for 2029.
Arafura’s largest shareholder is Australian magnate Gina Rinehart, a Trump supporter who attended his inauguration at Mar-a-Lago.
But industry leaders stressed that government backing alone will not be enough.
“If customers don’t cure their addiction to lowest possible cost supply from China, then there will be no inducement of projects anywhere else,” said Syrah Resources CEO Shaun Verner.
Analysts said the latest deal boosts investor confidence but warned that building a resilient global supply chain would take years.
Dylan Kelly of Terra Capital said rare earth prices are unlikely to fall further and that “Monday’s announcement has increased the investment allure of Australian projects.”
In June, India’s automobile industry had also sounded the alarm over China’s export curbs on rare-earth magnets, urging the government to intervene as production schedules faced disruption.
Automakers, including those in the fast-growing electric vehicle segment, reported delays in securing import approvals from China’s Ministry of Commerce.
The restrictions, imposed by Beijing in retaliation to higher US tariffs on Chinese goods, had already begun to ripple through India’s supply chains, underscoring the global reach of the rare earth crunch.
For now, Beijing’s grip on rare earths remains firm, and automakers face a long and costly road to secure independence from China’s mineral monopoly.
With inputs from Reuters