India's auto sector least impacted by rare earth curbs as over 95% vehicles have IC engine; EVs, hybrids hit hardest: Report

ANI June 17, 2025 278 views

China's rare earth export restrictions will hit India's fledgling EV sector hardest while leaving conventional petrol/diesel vehicles largely unscathed. Electric passenger vehicles face the biggest impact due to their reliance on rare earth magnets in motors, followed by hybrids and electric two-wheelers. With just 3-7% market penetration currently, India's auto sector remains insulated as 95% vehicles still run on IC engines. The report highlights China's stranglehold over global rare earth supply chain, forcing automakers to navigate new certification hurdles.

"The greatest impact of the above restriction in descending order will be electric PVs, hybrid PVs, and electric 2W" - Nuvama Report
New Delhi, June 17: India's auto sector is least impacted by the recent curb of rare earth magnets by China as over 95 per cent of vehicles in India's are internal combustion engine (IC) vehicles noted a report by Nuvama.

Key Points

1

China controls 90% global rare earth processing

2

EVs use 8x more rare earths than IC engines

3

India's EV adoption still below 10% penetration

4

Export curbs require 45-day certification for auto firms

Electric vehicles (EVs), along with hybrid passenger vehicles and electric two-wheelers, are likely to face the most impact from restrictions on rare earth materials (REMs).

The report explained that while REMs are used in a wide range of industries, the biggest effect of the restrictions will be felt in the EV sector, particularly in EV motors.

It stated "The greatest impact of the above restriction in descending order will be electric PVs, hybrid PVs, and electric 2W. Conventional ICE vehicles will be least impacted".

In India, EV adoption is still at an early stage, with penetration at just 7 per cent for two-wheelers and 3 per cent for passenger vehicles.

Although EV sales have grown at a strong compound annual growth rate (CAGR) of 25 per cent between FY23 and FY25, the growth is on a low base. Therefore, even if sales decline, the overall effect on the Indian auto sector is expected to be limited.

Most electric vehicles use Permanent Magnet Synchronous Motors (PMSMs), which rely on REMs to maintain a stable magnetic field, especially at high temperatures. The use of PMSMs is far higher in EVs compared to hybrid or ICE vehicles.

As per the report, the average REM usage per vehicle is around 0.8 kg for electric vehicles, 0.5 kg for hybrid vehicles, and just 0.1 kg for ICE vehicles.

Hence, the impact of the restrictions will be the highest on electric passenger vehicles, followed by hybrid passenger vehicles, and then electric two-wheelers. Conventional ICE vehicles will see minimal impact.

In April, China imposed restrictions on the export of seven key rare earth elements: samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium.

These elements are essential in producing magnets like neodymium iron boron (NdFeB) and samarium-cobalt (SmCo), which are used in various applications including EVs. China currently controls over 90 per cent of global processing of rare earth elements, giving it significant control over the global REM supply chain.

Though the restrictions are mainly aimed at the defence sector, the ripple effects will be seen across the auto, industrial, and aerospace industries.

Auto manufacturers will now need to get end-user certification from the Chinese government to continue sourcing these materials. The process is expected to take around 45 days.

Reader Comments

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Rahul K.
This shows why we shouldn't put all our eggs in one basket! China controls 90% of rare earth processing - that's dangerous dependence. India must invest in domestic rare earth mining and processing. Atmanirbhar Bharat isn't just a slogan, it's economic security! 🇮🇳
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Priya M.
Good analysis but worrying for EV adoption. Just when we're trying to go green, supply chain issues emerge 😕 Maybe this will push manufacturers to develop alternative motor technologies that don't rely on Chinese rare earths?
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Arjun S.
Thank God most of our vehicles are still ICE! Shows our slow EV adoption is actually protecting us from this Chinese pressure tactic. But long term, we need to find solutions - can't let China control key tech materials.
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Sunita R.
As an EV owner, this is concerning. My Nexon EV might become more expensive to maintain if spare parts get costly. Government should step in with subsidies or alternative supply chains. We can't let China dictate our green mobility future!
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Vikram J.
Interesting data - only 0.1kg rare earths in ICE vs 0.8kg in EVs! Maybe hybrids are the smarter choice for now? Best of both worlds - better mileage than petrol cars but less dependent on Chinese materials than full EVs. Food for thought!
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Neha P.
While the impact is limited now, we must see this as a wake-up call. India has rare earth deposits in Kerala, Tamil Nadu, Odisha. Time to seriously develop these resources with proper environmental safeguards. Jai Hind! 🙏

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Tags:
rare earth metals China export curbs India EV industry Nuvama report electric vehicles IC engines