June 29, 2025: Global auto production risks grinding to a halt as China increases its stranglehold on raw materials for components that are the lifeblood of the EV supply chain, say analysts.
There was a 51% drop in Chinese rare earth magnet exports in April 2025 compared to March, far exceeding seasonal norms, according to the latest insight published by Wood Mackenzie on June 23.
The sharp decline follows the introduction of new export restrictions in April, with China’s government approving only around 25% of export licence applications submitted by automotive suppliers, Wood Mackenzie said.
The restrictions have significantly disrupted the supply of these critical components for EVs and hybrid drivetrains, sending shockwaves through the global automotive supply chain.
Thomas Jones, senior analyst, rare earths at Wood Mackenzie, said the sudden drop in exports has exposed the automotive industry’s vulnerability to supply chain disruptions.
“With China controlling over 90% of global processing capacity for rare earth magnets, the impact on vehicle production has been severe and far-reaching.”
According to the analysis, the effects of this export reduction have been felt across China’s major trading partners. The US experienced a 58% decline in imports, while India saw a staggering 78% drop.
South Korea and Germany were also significantly affected, with decreases of 73% and 47% respectively.
Meanwhile, the European Association of Automotive Suppliers reported that the export restrictions have already led to the shutdown of several production lines and plants across Europe.
The US and Australia are leading investment in developing an alternative rare earth supply chain, with the former already investing $1.4 billion in various rare earth mining, separation and refining projects.
However, Wood Mackenzie estimates that it may take several years before commercial production reaches the scale required to meet global demand, while development of projects in Europe has been slower and lacks the same scale, urgency, and firm funding support as those in the US and Australia.
Meanwhile, Wood Mackenzie said automakers and governments are in urgent talks with China’s leadership to secure faster approvals for rare earth magnet exports.
In parallel, manufacturers are looking at short-term alternatives to mitigate the disruption, with some considering importing sub-assemblies and components containing magnets, which are not currently subject to the same export restrictions.
However, this could drive up costs, particularly for US automakers facing tariffs, and may only be viable for high-margin producers able to absorb the added expense.
