The global automobile industry is facing a fresh crisis as China imposes stricter rules on the export of rare-earth magnets — essential parts used in both electric and traditional vehicles.
Auto suppliers, especially in Germany, say carmakers are making urgent calls, fearing that they might have to stop production as early as mid-July. Rare-earth magnets are small but crucial components found in car parts like side mirrors, parking sensors, electric motors, and speakers.
This shortage could become the third major supply shock for the auto industry, following the disruptions caused by the COVID-19 pandemic and the global chip shortage.
China currently produces more than 90% of the world’s rare-earth magnets. This gives the country strong control over global supply, and companies are now struggling to find alternative sources. While there are ongoing efforts to make magnets that don’t rely on rare-earth elements or to move manufacturing to other countries, these options are still years away from becoming practical.
Big car companies like General Motors (GM), BMW, and Mercedes-Benz are now trying to secure as much supply as possible. Some are also working on redesigning their motors to reduce dependence on rare-earths. However, experts say this issue might only be the beginning. China’s control over other important raw materials could lead to more such challenges in the future.
China’s rare earth exports jumped 23% in May, reaching 5,865 tons and bringing total exports for the year to 24,827 tons. The increase comes just ahead of upcoming US-China trade talks, where rare earths are expected to be a major focus. Export restrictions were relaxed in May following tighter controls in April.
In short, the auto industry is once again facing supply chain uncertainty — and this time, the threat is coming from rare-earth magnets, a part most consumers never think about, but one that powers many everyday features in modern vehicles.
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