China tightens grip on rare earths supply chain

The global automotive industry faces a critical challenge as China tightens its grip on rare earth magnets.

According to Wood Mackenzie’s latest insight, there was a 51 per cent drop in Chinese rare earth magnet exports in April 2025 compared to March, far exceeding seasonal norms.

The sharp decline follows the introduction of new export restrictions in April, with the Chinese Government approving only around 25 per cent of export licence applications submitted by automotive suppliers.

Wood Mackenzie analysis suggests the restrictions have significantly disrupted the supply of these critical components for electric vehicle (EV) and hybrid drivetrains, sending shockwaves through the global automotive supply chain.

“The sudden drop in exports has exposed the automotive industry’s vulnerability to supply chain disruptions,” Wood Mackenzie rare earths senior analyst Thomas Jones said.

“With China controlling over 90 per cent of global processing capacity for rare earth magnets, the impact on vehicle production has been severe and far-reaching.”

The effects of this export reduction have been felt across China’s major trading partners. The United States experienced a 58 per cent decline in imports, while India saw a staggering 78 per cent drop. South Korea and Germany were also significantly affected, with decreases of 73 per cent and 47 per cent respectively.

The European Association of Automotive Suppliers (CLEPA) reports that the export restrictions have already led to the shutdown of several production lines and plants across Europe.

Major automakers are experiencing varying degrees of disruption, with companies such as BMW, Suzuki, and Ford reporting impacts ranging from minor supplier delays to month-long production halts for specific models. The situation is especially critical for EV manufacturers, as most electric vehicles rely on permanent magnet synchronous motors that use neodymium-iron-boron magnets.

“Our analysis suggests that a substantial portion of global automotive production could be affected by China’s tighter export controls,” Wood Mackenzie principal analyst, transportation and mobility Egor Prokhodtsev said.

“This crisis makes it clear just how critical it is to build more resilient and diversified rare earth supply chains in the face of geopolitical challenges.”