Daybreak - Inside India's rare earth magnet emergency and how EV makers are coping

Episode Date: July 3, 2025

Rare-earth magnets, made from elements like neodymium and praseodymium, are essential to EV motors. But nearly all of them come from China. And since April, not a single shipment has arrived. Maruti Suzuki has already slashed production. TVS and Bajaj are counting down to a July deadline. Others, like Mahindra and Omega Seiki, saw this coming and started building workarounds.This isn’t just a supply chain issue. It’s a geopolitical move. China controls over 90% of rare-earth processing and has tightened export rules, stalling approvals to countries like India. Now, even importing magnets requires a bureaucratic maze of guarantees, embassy sign-offs, and unanswered emails.How are Indian EV makers are coping? Tune in to find out.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production.

Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get an alert as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. You see, the thing about electric vehicles is that they don't actually run on electricity. I mean, yes, they do need batteries, but batteries don't move the wheels.

It's the magnets that do. tiny powerful magnets made from rare earth materials like neodymium and presiodymium. They sit quietly inside motors and make the whole thing spin. And lately, they have almost disappeared from the market. India does not make these magnets at scale. We mostly import them from China. But since April, not one shipment has arrived. Not a single container has cleared the customs.

A few weeks ago, Rahel and I told you all about the rare earth crisis in India. We unpacked how China built a monopoly over the rare earth supply chain, how they did not just dig up these rare earths out of the ground, but really master the dark arts of refining them. And it wasn't pretty. Whole villages in Inner Mongolia that has the largest rare earth mine were poisoned. The landscape was left scarred. But this is the reason that China is ruling the game right now. It did what no one else dared to do. It decided to pay the environmental price to dominate the green economy. And now, as you already know, it is making the most of it amidst the tariff wars that were unleashed by the US.

China has been tightening export controls. So companies are scrambling to source rare earth magnets but are hitting red tape on both sides of the border. India, meanwhile, while it has rare earth deposits, has not. no tech or infrastructure to process them. Government efforts from new magnet plants to overseas mining deals are in motion, but they're nowhere close to scale. And EV makers here like TVAS and Bajaj have been sounding the alarm. Maruti Suzuki has slashed EV production by 70%.

TVS and Bajarge are still building two wheelers for now, but if shipments don't resume, motors will stop. Entire production lines could freeze sometime this. month. Some companies are redesigning their motors. Others are importing pre-assembled pots and a few are trying to build local alternative from scratch. So here is the question that we will dive into today. What happens to your EV revolution when one rare earth magnet holds it hostage? Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nicka Sharma and I don't chase the new cycle. Instead, every day of the week,

my colleague Rahal Philipos and I will come to you with one business story that is worth understanding and worth your time. Today is Thursday, the 3rd of July. Let's start with the basics. Electric vehicles or EVEs from scooters to SUVs rely on permanent magnets. Now, these magnets are made from rare earth elements and most EV motors use something called a PMSM. It is a permanent magnet synchronous motor. Without rare earth, these motors do not work. And since April, China has stopped approving export of rare earth materials to many countries,

including India. And this is not a one-off trade problem. It is policy. Last year, China introduced 32 new rules for companies in the rare earth business. On paper, they promised transparency, but in reality, they give Beijing full control from mine to magnet and they are using that control. Companies like Maruti Suzuki are already reacting. They had planned to build over 26,000 units of their Evitara SUV between April and September. Now that has been slashed to just 8,000. TVS and Bajaj are still producing. But they are counting

their inventories and July is when things might run dry. Others like Mahindra and Omega-Cki mobility saw this coming. Mahindra has actually been importing motors pre-assembled from value, which is a French partner. Omega Seiki went even further. They redesigned their motors entirely without rare earths. But these are exceptions. For most of the industry, this summer is looking like a slow motion shutdown. Now, this rare earth permanent magnet, if you're not aware, doesn't just power motors.

They are in power steering, infotainment systems. and even automatic windows. And China, which mines 70% and processes over 90% of the world's rare earth, is not just holding the keys. It has locked the door. So, even if India finds suppliers in other countries, they will still need Chinese export approval. Industry Insiders told my colleague the Ken reporter Supri Tanapam

that even if approvals are granted today, shipments will not arrive before mid-July. And the process is the punishment. First, get a letter of guarantee, swearing non-military use, then get that letter stamped by the Chinese embassy in India, then wait for Beijing Ministry of Commerce to give clearance. Meanwhile, Chinese suppliers also need export approvals. And none of this has a clear timeline.

There is no standard procedure, just silence lately. 30 Indian firms have applied for Chinese licenses, one was rejected and the others have not heard back. Some companies are trying to pivot. Like I told you earlier, Mahendra is switching to alternative materials. TVS outsources motors from Bosch, which still has some inventory. Ola and Omega have developed magnet-free motors.

Ather is outsourcing but claims it is unaffected. And JSWMG, which is partly Chinese-owned, seems pretty confident. And that might have something to do with their smooth access to Chinese approvals. More on this in the next segment. Hi, this is Rahil, the co-host of Daybreak. I'm quickly pausing this episode to share something very exciting with you. We are hiring. We are looking for someone in the early stages of their journalism career,

maybe your fresh out of journalism school, or you've done a couple internships and projects, and are eager to take on your first full-time role in audio. I'm looking for a co-host to help launch a brand new podcast from the Ken. This is a full-time role, and you'll get to work closely with me as well as the rest of the audio team right from story pitches to interviews to shaping how the final show sounds. If you're curious, ambitious and absolutely love audio storytelling,

we would love to hear from you. All the details will be in the show notes of this episode. So what is India doing about this? You see, there is no instant fix. But a few players are already working on the long game. In Chennai, a company called Star Trace India has been producing rare earth magnets in small, batches, mostly for research and development.

Now, they are trying to raise 100 crore rupees to build a fully automated plant. They said that they have cracked the process, which is turning raw oxide into usable magnets with help from German collaborators. Then there is Midwest Advanced Materials, which is a subsidiary of the Hyderabad-based Midwest group. They are building India's first full-stacked magnet-making facility. They have even secured a rare earth mine in Sri Lanka. and have partnered with India Rare Earths Limited.

And their goal is to begin production by January 2026 with a capacity of 500 metric tons. In the meantime, EV makers are getting creative. Marathi, for example, is rewriting contracts to import motors instead of raw magnets. Mahendra says that it has enough stock for now. It is also lobbying the government along with SIAM, the auto industry group, to expedite paperwork. And then there is even talk of fiscal incentives and tariff breaks to support domestic magnet manufacturing under the National Critical Mineral Mission. But all of this is still developing. For now, companies are hedging their bets.

They are sourcing assembled parts wherever possible. They are redesigning motors and exploring non-Chinese suppliers, even though many of those use Chinese-funded facilities. Tata Motors, for example, says that it has achieved 80% localization in its Harial EV, including in-house motors. But that could make them more vulnerable if raw material supplies stay frozen. And even globally, we know that China's influence goes beyond just India. They've allegedly warned South Korean suppliers to not work with US defense contractors. So this is more than just an India problem. It is turning into a global industrial standoff.

And at its core, it's not just about trade policy or shipping dealies. It is about control. Who gets to build the motors of the future? Who defines the technology and who controls its supply? Right now, the answer is China. But not forever. Global players like Balio and Mali are designing rare earth-free motors. Indian firms like Omega Siki are cutting out the magnet altogether.

And with new factories and government support, India may finally build its own magnet supply. The road won't be easy. But one thing is clear. Until the magnets flow freely again, India's EVE dreams are running on borrowed time. Daybreak is produced from the newsroom of the Ken India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature. stories, newsletters and podcast extras.

To subscribe, head to the ken.com and click on the red subscribe button on top of the Ken website. Today's episode was hosted by Snitha Sharma and edited by Rajiv Siyadh.