Automakers and parts suppliers worldwide are scrambling to secure rare-earth magnets after China tightened its export controls, sparking fears of widespread factory shutdowns. Frank Eckard, CEO of German magnet maker Magnosphere, said automakers have warned that their plants could be idled by mid-July without alternative magnet supplies.
China dominates the global rare-earth magnet market, controlling up to 70% of mining, 85% of refining capacity, and roughly 90% of magnet production. These magnets are essential for both electric vehicles (EVs) and internal combustion engine cars, used in components such as motors for side mirrors, oil pumps, windshield wipers, and various sensors. The average EV requires about one pound of rare-earth elements, double that of a fossil-fuel vehicle.
The export restrictions come amid rising geopolitical tensions and have prompted emergency talks. U.S. President Donald Trump recently announced that Chinese President Xi Jinping has agreed to ease exports of rare-earth minerals to the U.S., with trade negotiations scheduled to take place in London.
Industry experts warn this crisis could become the third major automotive supply shock in five years, following semiconductor shortages and COVID-19-related factory closures. Despite prior disruptions, many automakers have yet to fully secure backup supplies or reduce reliance on just-in-time inventory models.
Several European auto supplier plants have already shut down due to shortages, with more closures expected, according to the European Association CLEPA.
Moreover, automakers and suppliers such as General Motors, BMW, ZF, and BorgWarner are racing to develop motors using low-to-zero rare-earth materials. However, these technologies remain years from large-scale deployment and cost competitiveness.
In response, the European Union has launched the Critical Raw Materials Act to boost domestic sourcing, but critics argue that progress is too slow to alleviate current shortages. Recycling initiatives and the development of rare-earth-free magnets are also underway, with companies such as Minneapolis-based Niron and UK-based Warwick Acoustics advancing alternative technologies; however, a commercial-scale impact is still years away.
Meanwhile, automakers are urgently assessing their supply chains and stockpiling magnets to maintain assembly line operations. Analysts warn that manufacturers may face parts shortages, forcing them to assemble vehicles incompletely and store them until the necessary components arrive. This scenario echoes the recent semiconductor crisis.
This rare-earth bottleneck is a warning of broader supply chain vulnerabilities. China also dominates supplies of other critical raw materials, including manganese, graphite, and aluminum, which could be leveraged in future export controls.
As the industry grapples with immediate disruptions and long-term strategic shifts, the reliance on China remains a critical vulnerability in the global automotive supply chain.
