China has begun issuing export licenses for rare earth shipments, allowing limited resumption of deliveries to select Western firms, but the move has left Indian automakers warning of imminent production halts due to unfulfilled orders and depleted inventories.
According to Chinese business outlet Caixin, three major rare earth magnet producers confirmed they have received export licenses from the Ministry of Commerce under a new “one batch, one license” framework, which requires a separate approval for each shipment based on varying material composition. German carmakers have reportedly begun receiving supplies, while their Indian counterparts have yet to secure any export permissions.
“Starting end May or early June, auto industry production is expected to come to a grinding halt,” said Indian automotive group SIAM in a document shared during a meeting attended by Maruti Suzuki, Mahindra & Mahindra and Tata Motors executives. The delay in obtaining licenses has left Indian manufacturers with dwindling stockpiles and no immediate path to replenish them.
Although China’s foreign ministry recently indicated a willingness to cooperate on export controls to maintain global supply chains, the licensing system has introduced delays following an initial export freeze. The restrictions were imposed after the U.S. announced steep tariffs on Chinese imports. China, which dominates roughly 90% of global rare earth production, responded by requiring licenses for exports of 17 rare earth elements and magnets, halting shipments while the system was implemented.
Christian Grimmelt, Partner at consulting firm Berylls by AlixPartners, warned that even European companies could face shutdowns within weeks. “In four to six weeks, the last stocks are likely to be used up. Then parts of production will have to be stopped,” he told Automobilwoche. He cautioned that the shortage could “jeopardise the ramp-up of electromobility in Europe.”
Prices for rare earths have already surged 40–50% in recent months. While German manufacturers such as Volkswagen, BMW, and Mercedes-Benz have obtained licenses, their responses remain measured. A Mercedes spokesperson said the situation was “in flux,” adding the company is “observing and evaluating” developments. A Volkswagen representative stated that supply remains stable for now, with ongoing efforts to secure additional licenses through suppliers and sub-suppliers.
Despite previous disruptions, raw materials expert Grimmelt noted the automotive sector has made limited progress in reducing dependency on rare earths. “Higher stock levels are always a cost factor. And getting into recycling is also costly and takes several years before a new supply chain can be created,” he explained.
Though German automakers have sought to minimize reliance on rare earth-dependent components, the industry remains exposed due to its investment in electric mobility. The situation underscores the strategic risks associated with concentrated critical material supply chains as global competition over green technologies intensifies.