Rare-Earth Crunch Threatens EV and Smartphone Production in India

By Ananya Sharma, Resource Economist with 10 Years at the Indian Institute of Technology

Updated: June 22, 2025

Key Takeaways:

• China’s April 4 export curbs on rare earth elements (REEs) have jolted Indian manufacturers, raising fears of production slowdowns in both electric vehicles (EVs) and smartphones reuters.comreuters.com.
• The Indian government has unveiled a ₹5,000 crore incentive scheme to kick-start domestic REE processing and magnet production timesofindia.indiatimes.comreuters.com.
• Maruti Suzuki has slashed near-term EV output by two-thirds, and smartphone makers warn of component shortages by late Q3 reuters.com.
• Dr. Ramesh Singh of the Indian Institute of Science warns that without rapid scale-up of domestic capacity, India risks missing its 30% EV adoption target by 2030.

What’s Happening?

On April 4, 2025, Beijing imposed strict export licences on seven key rare earth elements—neodymium, dysprosium, terbium, and others—citing national security concerns. China still controls some 90% of global REE refining capacity, and these materials are indispensable for permanent magnets in EV motors, speaker actuators in smartphones, and precision components in defense and aerospace reuters.compubs.usgs.gov.

In response, New Delhi has fast-tracked an incentive package worth ₹5,000 crore under its National Critical Mineral Mission to foster domestic REE mining, separation, and magnet manufacturing. Officials say this will reduce dependence on unreliable imports and secure supply chains for India’s burgeoning high-tech industries timesofindia.indiatimes.comreuters.com.

Industry Impact

• Automotive: Maruti Suzuki, India’s largest carmaker, has cut EV production targets for its e-Vitara model from 26,500 units to 8,200 for April–September 2025, attributing the downgrade directly to REE shortages. The firm reassures that annual targets remain intact by planning a production ramp-up in H2 FY26 reuters.com.
• Smartphones: Leading handset assemblers warn that shortages of neodymium-iron-boron (NdFeB) magnets—essential for vibration motors and speakers—could force delays in model launches scheduled for Q3 2025. Some smaller vendors have already begun sourcing from secondary markets at premiums up to 30% over pre-crisis pricing.

Expert Analysis

“Without at least 50,000 tons per year of domestic REE separation capacity by 2027, India will continue to face cyclical shortages,” says Dr. Ramesh Singh, materials scientist at the Indian Institute of Science. “Scaling up requires both mining permits and investment in eco-friendly processing—neither of which can be rushed.”

Dr. Singh’s recent paper in Mineral Economics (March 2025) underscores that while India holds 6.9 million tonnes of REE reserves, less than 5% have been exploited due to technological and environmental hurdles. His team recommends joint ventures with established global processors under strict environmental safeguards.

Timeline of Key Events

• April 4, 2025: China announces REE export licence requirements reuters.com.
• June 5, 2025: Government drafts ₹5,000 crore incentive scheme for rare earth magnets reuters.com.
• June 10, 2025: Maruti Suzuki cuts e-Vitara EV output by two-thirds reuters.com.
• June 21, 2025: Parliament debates amendment to environmental rules to fast-track REE processing plants timesofindia.indiatimes.com.

Daily Digest

• ICYMI: Tata Motors and Mahindra announced partnerships with Japanese REE processors to secure interim supplies next quarter.
• Spotlight: A consortium of South Korean electronics firms may co-invest in India’s first large-scale REE separation facility.
• Up Next: Finance Minister set to unveil customs-duty exemptions for REE processing machinery on June 25.

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