Automakers and parts suppliers across Europe are facing mounting pressure as Chinese export restrictions on rare-earth magnets threaten to bring production lines to a halt, industry executives and analysts said.
Frank Eckard, CEO of German magnet manufacturer Magnosphere, described an influx of urgent inquiries from automotive firms seeking alternative supplies. “The whole car industry is in full panic,” Eckard told reporters. “They are willing to pay any price.” Some manufacturers have warned their plants could be idled by mid-July without access to critical components.
Rare-earth magnets, essential for electric motors and various electronic vehicle parts, are the latest flashpoint in the automotive supply chain. Their tightening supply marks the third major industry disruption in five years, following the COVID-19 pandemic and the semiconductor shortage that curtailed vehicle output globally from 2021 to 2023.
Despite previous crises prompting automakers to overhaul supply strategies and stockpiling practices, Eckard noted that “nobody has learned from the past.” China currently controls around 70% of rare-earth mining, 85% of refining, and 90% of magnet production, according to consultancy AlixPartners. This dominance leaves automakers dependent on Chinese export approvals, managed by a small group of officials.
Some European auto suppliers have already been forced to shutter plants. CLEPA, the continent’s automotive supplier association, warned more closures are imminent. “Sooner or later, this will confront everyone,” said CLEPA Secretary-General Benjamin Krieger. Rare-earth magnets are used extensively in modern vehicles—powering everything from oil pumps to fuel leakage sensors—and electric vehicles (EVs) typically require double the amount found in combustion-engine cars.
Efforts to reduce dependence on China are gaining momentum but remain far from maturity. Automakers such as General Motors and BMW, along with suppliers like ZF and BorgWarner, are developing motors that reduce or eliminate rare-earth content. Meanwhile, governments are launching initiatives to bolster domestic supply. The EU’s Critical Raw Materials Act aims to boost regional capacity, but progress has been slow.
New technologies are emerging as possible long-term solutions. U.S.-based Niron Magnetics, backed by GM, Stellantis, and Magna, has raised over $250 million to develop rare-earth-free magnets, with production targeted for 2029. UK firm Warwick Acoustics has engineered rare-earth-free speakers due to debut in a luxury vehicle this year, though broader adoption could take another five years.
In the short term, automakers are working to identify suppliers that require Chinese export permits and are exploring temporary stockpiling strategies. Mercedes-Benz is reportedly discussing rare-earth inventories with partners. Analysts warn that manufacturers may have to assemble vehicles without certain parts and store them until supply stabilizes, a tactic previously deployed during the chip shortage.
Beyond rare earths, China dominates supply chains for other critical materials. A 2024 European Commission report found it controls over half the global supply of 19 key resources, including graphite and aluminum. “This just is a warning shot,” said Andy Leyland of SC Insights, cautioning that any of these materials could become leverage points in future disputes.
Source: Reuters