India's electric vehicle (EV) and renewable energy sectors are facing a potential crisis as China tightens its grip on the global supply of rare earth magnets. These magnets, made from materials like neodymium-iron-boron (NdFeB), are essential components in EV traction motors, regenerative braking systems, wind turbines, and other high-performance applications. With China controlling approximately 90% of the global rare earth magnet supply, India, which imports nearly all of its rare earth magnets from China, is now actively seeking alternative sources to secure its supply chain.
Beijing's export restrictions, implemented in April 2025, require special licenses and assurances that the magnets will not be used by the US or defense sectors, disrupting shipments to Indian automakers and other industries. This has prompted the Indian government and industry to explore multiple strategies, including diplomatic negotiations, diversification of import sources, and boosting domestic production capabilities.
Commerce and Industry Minister Piyush Goyal has stated that India is in talks with China to ensure the continued supply of these critical components while simultaneously working on developing "alternate sources." He emphasized the need for trusted partners in supply chains, highlighting India's potential to become a reliable alternative for the world.
To diversify import sources, India has initiated discussions with countries like Vietnam, Indonesia, and the United States. Vietnam, due to its geographical proximity, is a promising candidate, although much of its production is already committed to domestic use. Indonesia's supply chain, however, is deeply intertwined with Chinese firms, raising concerns about reliability. Western nations offer a more dependable alternative, but their higher prices and longer lead times pose challenges. India is aiming to secure alternate magnet supplies within 60 days.
On the domestic front, India is accelerating efforts to build its own rare earth ecosystem. Public-sector entities like India Rare Earths Ltd (IREL) and the Bhabha Atomic Research Centre (BARC) are jointly developing a small magnet facility in Visakhapatnam. Additionally, the Trafalgar Group has announced plans for a plant in Gujarat that could meet 20% of domestic demand by 2027. Hyderabad-based Midwest Advanced Materials (MAM) is preparing to roll out 500 tonnes of NdFeB magnets annually in the coming months, with plans to scale up tenfold by 2030.
The government is also considering incentives such as subsidies and import duty waivers for processing equipment to jump-start local production. These initiatives are aligned with the National Critical Mineral Mission, launched last year to leverage India's estimated 6.9 million tonnes of rare earth reserves. However, mining is only part of the equation, as India currently accounts for a mere 0.25% of global rare earth processing output, highlighting a massive capability gap. Vedanta is collaborating with CSIR laboratories, including NITI Aayog, to extract rare earth oxides, such as scandium, from bauxite residue, which could provide a strategic advantage amid the global crunch.
Some suppliers are also exploring the option of importing pre-assembled motors to sidestep the restrictions, but this could inflate costs and undermine the objectives of India's Production-Linked Incentive (PLI) scheme aimed at local manufacturing.
The situation has been described as a "wake-up call" for India and the world, underscoring the need for resilient and diversified supply chains. As India pursues strategic autonomy in critical technologies, rare earth materials are set to play a central role in its industrial and geopolitical trajectory. The government is actively working with stakeholders to develop domestic capacity, reduce dependence on China, ramp up R&D, promote private sector participation, and explore international collaborations to build a sustainable and self-reliant ecosystem for rare earth materials.
