The electric vehicle and automotive industries in India are confronted with a considerable threat as China has imposed restrictions on the exports of rare-earth magnets which are essential parts for electric vehicle motors and electric vehicle steering systems. As China represents over 80 per cent of India's supply of rare-earth magnets, the disruption in supply is threatening to decimate supplies, as Eicher Motors, which manufactures Royal Enfield motorcycles, has stated the shortages have impacted its operations and the company is looking for alternative sources of magnets and magnet materials to ensure it continues operations. Major automakers like Tata Motors and Maruti Suzuki and Mahindra & Mahindra are also working hard to secure supply chains and potentially redesign motor components to do away with rare-earth magnets altogether.

If the gap in supply is not closed, analysts in the industry believe that India's ambitions for electric vehicles could be seriously hindered, as well as production targets. The government is stepping in with production-linked incentives (PLI) and support for domestic magnet manufacturing in action, with states promoting Sona Comstar, Mahindra and Uno Minda to develop local capabilities and reduce their reliance on China.

A handful of manufacturers are also looking into importing motors or rotor units that are fully assembled from overseas to avoid the issues of magnet shortages, but these alternatives are expensive and would need extensive testing before they could be used. This situation emphasizes how susceptible India's auto supply chain is to geopolitical and trade tensions.

Overall, the rare-earth magnets shortage has accentuated the need for India to speed-up the development of domestic supply chains and diversify procurement to secure its young electric vehicle sector.