NEW DELHI/MUMBAI – 26th June 2025 — India’s electric two-wheeler makers are staring at a turbulent festive season, as a global shortage of rare earth magnets threatens to derail new model launches and disrupt inventory during the industry’s most crucial sales window.
The squeeze, triggered by tightened export controls from China — the world’s dominant supplier — comes just as companies gear up for the festive season, which starts from mid-August to Dussehra and Diwali, which together account for nearly a quarter of the sector’s annual volumes.
According to founders and analysts who spoke to EV Story, OEMs are forced to reduce model plans and look into risky workarounds as their options become more limited. The problem has been made worse by China’s requirement for end-user certification on exports of magnets and sub-components.
Ratings firms like Crisil and ICRA have cautioned that if the disruption persists, demand may decline during the festive quarter, but some business executives say the long-term effects are even more worrisome. Unlike the semiconductor crisis, this one is deeply geopolitical.
“Both the US and China have something to gain from trade. A major auto industry association’s head stated, “China needs access to US markets, and the US needs magnets to make them.” What does India have to offer in exchange for magnets, though?
“India cannot negotiate on sovereignty, even though it may seek concessions on issues like the Northeast or the Indus Water Treaty. We are therefore stuck,” the industry association’s top boss added
The immediate issue is still unresolved, he continued, even though the government is thinking about providing subsidies for long-term rare earth manufacturing. “What about the short term? Now, each OEM must fend for itself.
Rare Earths: Small Weight, Big Disruption – Why Festive Quarter Faces Supply Chain Jitters
“The electric two-wheeler market was expected to grow by 24–27% this year,” said Poonam Upadhyay, Director at Crisil Ratings. “But if the magnet crunch stretches beyond July 2025, festive sales could see moderation, especially in rural-facing, price-sensitive models that operate on lean inventories.”
With more than a dozen launches slated across entry-level, commuter, and premium segments, OEMs are rethinking their strategies. “Companies are beginning to streamline variant offerings and focus on high-volume models with faster ROI,” Upadhyay said.
OEMs Scramble for Workarounds
Rare earth magnets — especially neodymium-based ones — are essential to Permanent Magnet Synchronous Motors (PMSMs) used in most electric two-wheelers. Each e-scooter uses roughly half a kilogram of these magnets. While individually modest, the aggregate demand across India’s vast two-wheeler market makes it highly vulnerable to any supply shock.
Most OEMs have just 1–1.5 months’ worth of magnet inventory, informed Rohan Kanwar Gupta, Vice President and Sector Head at ICRA Ratings. To avoid output cuts, they are racing to secure alternatives.
“Companies are looking at importing fully assembled motors from China, sending rotors abroad for magnet assembly and reimport, or exploring engineered substitutes for neodymium,” Gupta said. “These workarounds carry logistical and regulatory challenges, but OEMs are fast-tracking validation cycles.”
Some firms are also experimenting with magnet-free motor technologies — based on inductive or electromagnetic systems — though experts warn these remain difficult to scale for compact scooter platforms.
“Despite the pressure, most OEMs are cautiously optimistic about maintaining production—unless the situation worsens,” Gupta added.
Product Variety Could Shrink
The festive season is critical for footfall and conversions, traditionally driven by aggressive variant launches. However, constrained magnet availability may limit product assortment, hurting showroom momentum.
“If availability tightens, the ability to offer differentiated models could shrink,” said Upadhyay. “That directly impacts retail conversion during a high-opportunity window.”
She added that many OEMs have already begun recalibrating their lineups. “Limited magnet availability may force cuts in lower-volume variants.”
Second Half of FY25 Becomes Crucial
While the long-term electrification outlook remains strong, analysts agree that a prolonged disruption could flatten growth in the near term. Crisil noted that if bottlenecks continue into Q3, demand may spill over into Q4 or even FY26, raising the stakes for how well OEMs adapt to a rapidly shifting supply landscape.
