MUMBAI, 12th June 2025: India’s automobile industry is bracing up for a critical supply shortage starting in mid-July 2025, as inventories of rare earth magnets—essential for electric and high-performance automotive components—are expected to run low, according to ICRA.
In response to the disruption, major automakers like Maruti Suzuki and Tata Motors have asked the government to temporarily relax the Domestic Value Addition (DVA) standards under the PM e-Drive initiative’s Production-Linked Incentive (PLI) scheme and Phased Manufacturing Programme (PMP).
Due to shipment clearance delays and the fact that 85% of supplies come from China, manufacturers are scrambling to find alternatives before production is affected.
“The concern over rare earth magnet supplies is distressingly familiar for India’s automobile industry, which has only recently recovered from the semiconductor crisis of 2021-2022,” said Jitin Makkar, Senior Vice President of ICRA.
Automakers Seek Regulatory Relief
Leading automakers, such as Maruti Suzuki and Tata Motors, are hoping that if the government steps in, the OEMs will be able to temporarily maintain production lines and avoid order backlogs by importing fully assembled motors from China.
“The government is in a bind because it cannot immediately amend the norms it has set for OEMs without having a vision as to how many months this policy can be in abeyance and how long this crisis will continue,” top industry sources in the Ministry of Heavy Industries told EV Story.
“Although the industry is starting from a dark place right now, authorities are worried about the difficulties the auto industry is facing,” the top official working on the crisis management team continued.
Challenges with Workarounds
Even as they seek regulatory relief, manufacturers are considering other contingency plans, such as moving assembly operations to different locations, researching engineered substitutes for rare earth magnets, or switching to alternative motor technologies, according to the R&D head of a major Bengaluru-based EV motor manufacturer.
Regulatory barriers, engineering difficulties, and lengthy validation and implementation times are just a few of the disadvantages of these workarounds, he continued, adding that they also increase the risk of production delays.
Strategic Changes on the Horizon
As July draws near, ICRA warns that the ongoing crisis might lead to long-term changes, forcing Indian automakers and component suppliers to increase their investments in material innovation and diversify their sourcing strategies. For India’s quickly expanding EV industry, which runs the risk of losing steam just as domestic production starts to pick up steam, the stakes are especially high.
Rare earth magnets are responsible for almost 30% of motor costs, so electric two-wheelers are probably going to be the first to be impacted. India imported about USD 200 million worth of these magnets in FY25, with China accounting for 85% of the imports, underscoring the country’s strategic reliance on a single supplier.
