China grants license to Indian companies to import rare earth magnets

In a key development signaling an easing of supply chain bottlenecks from China, some Indian companies have received permits to import rare earth magnets from the world’s dominant producer of these critical materials.

“Some Indian companies have received licenses for importing rare earth magnets from China,” External Affairs Ministry spokesperson Randhir Jaiswal told reporters on Thursday.

According to media reports, licenses have been granted to Jay Ushin, De Diamond Electric India, and the Indian units of German auto component major Continental AG and Japan’s Hitachi Astemo. 

China’s export restrictions on rare earth magnets and related materials started in April and have disrupted global automotive supply chains and triggering concerns among vehicle manufacturers. 

The restrictions have impacted India’s electric vehicle sector, which relies heavily on rare earth magnets for components such as motors and sensors, thereby increasing the risk of production delays.

Major electric two-wheeler makers, such as Bajaj Auto, TVS Motor, and Ather Energy, are facing production hurdles resulting from the scarcity of heavy rare-earth magnets.

Company executives indicated that if not for these supply chain constraints, their festival season sales figures would have been substantially higher, underscoring the potential financial cost of the shortage.

Heavy rare-earth magnets are vital in electric vehicle motors and digital systems, offering high performance, compact size, and improved energy efficiency. 

China dominates this space, producing about 60% of the world’s rare earth elements and controlling around 90% of the refining capacity. 

India was estimated to be the fifth-largest importer of rare earth permanent magnets and magnet alloys from China last year, with imports totalling nearly 2,850 tonnes.

Beijing’s new export licensing regime was initially viewed as a response to the US tariffs, but its impact spread globally.

The process of securing import approvals has become cumbersome, requiring end-use declarations confirming the materials will not be used for military purposes. 

Applicants must obtain certifications from multiple Indian ministries and the Chinese embassy, followed by export clearance from Chinese authorities.

Over 30 applications from Indian firms are still awaiting approval. Companies must apply through their China-based suppliers, detailing end-use and undertaking not to resell the materials. 

For now, China is reportedly granting licenses only for consumer and civilian applications, as rare earths also have significant military uses.