India’s auto sector is facing a major production hurdle due to a rare earth magnet shortage, caused by China’s export restrictions that began in April 2025. The ban, reportedly a response to U.S. tariffs, has forced exporters to seek special licenses, disrupting global supply chains — especially for Indian two-wheeler manufacturers.
China’s Dominance in Rare Earth Magnet Shortage
China controls over 90% of the world’s rare earth magnet supply, making its curbs a serious challenge for countries like India. Eicher Motors, which owns Royal Enfield, said the shortage affected production of its Himalayan, Scram, and Guerilla models in Q1 2025.
“We started working on alternatives about three to four months ago. Importing those materials is no longer a big issue,” said B. Govindarajan, Eicher’s Managing Director, during a post-earnings call.
Impacts of Rare Earth Magnet Shortage
Other Indian firms are also scrambling. TVS Motor confirmed it is scouting rare earth-free materials for its e-scooter motors, while Ola Electric announced it will begin using rare-earth-free motors from December 2025. Meanwhile, Bajaj Auto has warned that if the shortage continues, they may have no EV production at all in August.
To address the crisis, the Indian government is engaging with Chinese authorities and preparing a ₹1,345 crore plan to boost domestic rare earth magnet production.
The impact goes beyond motorcycles. Experts say the shortage could slow growth in India’s electric vehicle and consumer electronics industries — both heavily reliant on the affected materials.
Still, Eicher Motors posted strong financials, reporting a profit of ₹12.05 billion ($137.6 million) for Q1 2025, beating estimates thanks to strong local and export demand.
What’s Next
The situation underscores India’s urgent need to diversify critical imports and ramp up local production to safeguard against future global shocks.
Published in SouthAsianDesk, August 1st, 2025
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