India Approves Rs 7280 crore Plan to Make Magnets for EVs. Here's Why It Matters.

The Centre on Wednesday announced the approval of a key initiative designed to bolster India’s manufacturing prowess in materials crucial for automotive and other industries. The Scheme to Promote Manufacturing of Sintered Rare Earth Permanent Magnets has been sanctioned with a financial outlay of Rs 7,280 crore, signaling a major push toward self-reliance in a component vital to the global shift toward electrification.

The primary goal of this first-of-its-kind scheme is to establish a domestic production capacity of 6,000 Metric Tons per Annum (MTPA) for integrated Rare Earth Permanent Magnets (REPMs).

Why does this development matter?
For the automotive industry, specifically the rapidly expanding electric vehicle (EV) sector, Rare Earth Permanent Magnets (REPMs) are non-negotiable. These materials are recognized as some of the strongest types of permanent magnets available. They are essential components not just for EVs, but also for renewable energy systems, electronics, aerospace, and defense applications.

The scheme aims for “integrated” manufacturing. This means that the production facilities will handle the entire process domestically, moving from the initial stage of converting rare earth oxides into metals, then forming these metals into alloys, and finally processing the alloys into finished REPMs.

The momentum behind this manufacturing push is largely driven by the surging requirements of the electric vehicle market. India’s consumption of REPMs is projected to double by 2030 compared to the demand levels of 2025, primarily due to rapid growth across sectors like EVs and consumer electronics. Currently, India relies heavily on international markets, as the demand for these crucial magnets is met primarily through imports.

The Financial Blueprint and Timeline:
The total scheme duration is set for seven years from the date of award. This timeline includes a two-year period dedicated to the initial set-up and construction of the integrated manufacturing facilities (known as the gestation period), followed by five years during which financial incentives will be disbursed based on the sale of REPMs.

The Rs 7,280 crore financial outlay is divided into two main components:

1. Sales-Linked Incentives: Rs 6,450 crore allocated over five years to incentivize the sale of domestically produced REPMs.

2. Capital Subsidy: Rs 750 crore earmarked to support the physical establishment of the 6,000 MTPA manufacturing capacity.

The government plans to distribute the total capacity across five beneficiaries, who will be selected through a global competitive bidding process. Each selected beneficiary will be allotted manufacturing capacity of up to 1,200 MTPA.

This initiative is expected to generate employment, strengthen the domestic manufacturing ecosystem, and advance the nation’s vision of building a technologically self-reliant and globally competitive industrial base.

Auto industry reaction:

Dr Anish Shah, Group CEO & MD, Mahindra Group commented on Q2 FY26 GDP numbers, “India’s 8.2% GDP growth in Q2 underscores the economy’s inherent resilience and the depth of domestic demand. Even amid headwinds such as US tariffs, our manufacturing and services sectors have demonstrated extraordinary adaptability and momentum. This performance reaffirms India’s position as the world’s fastest-growing major economy and strengthens confidence as we head into FY26.”

Vikrampati Singhania, President, ACMA, said, “ACMA wholeheartedly welcomes the Cabinet’s approval of the REPM Manufacturing Scheme. This is a strategic and forward-looking intervention that addresses one of the most critical gaps in the EV and advanced mobility ecosystem. Rare Earth Permanent Magnets are foundational to electric motors and high-efficiency systems, and the establishment of a domestic, integrated manufacturing base will significantly strengthen India’s technological competitiveness.

This initiative will not only reduce import dependence but also provide long-term resilience to the automotive supply chain, encourage investments in advanced materials, and position India strongly in global value chains for EVs and clean energy. We commend the Government’s vision and remain fully committed to supporting the industry in leveraging this opportunity for innovation, value creation, and Atmanirbhar Bharat.”

Shailesh Chandra, President, SIAM, said, “The Indian automobile industry welcomes the Government of India’s newly announced scheme to promote the domestic manufacturing of Rare Earth permanent magnets, with an allocated outlay of ₹7,280 crore. This initiative is a significant step toward building a resilient and stable supply chain, particularly for components and sub-assemblies essential for the production of electrified vehicles.

The scheme is expected to accelerate the adoption of clean mobility solutions and support India’s broader sustainability goals. By strengthening indigenous manufacturing capabilities, it will contribute to reducing carbon emissions and lowering dependence on crude oil imports, further enhancing the nation’s energy security.”

Stephane Deblaise, CEO, Renault Group India, added, “The Government’s decision to invest Rs 7,280 crore in India’s first integrated Rare Earth Permanent Magnet manufacturing scheme is a pivotal step in strengthening the nation’s self-reliance aspirations. This initiative reflects India’s strategic intent to strengthen its rare-earth refining capabilities and accelerate high-value manufacturing.

Vinod Aggarwal, MD & CEO, VE Commercial Vehicles further added, “VECV welcomes the Cabinet’s approval of the ₹7,280 crore Rare Earth Permanent Magnet (REPM) manufacturing scheme. Rare earth magnets are vital for electric drivetrains, power electronics, and high-efficiency systems that will increasingly support the commercial vehicle industry’s shift towards cleaner and more energy-efficient technologies. We appreciate the government’s vision of this forward-looking policy in creating an integrated domestic value chain, from rare earth oxides to metals, alloys, and finished magnets. By addressing a critical supply-side vulnerability in future mobility, this initiative will significantly strengthen India’s self-reliance in advanced materials."

"As the country moves towards its Net Zero 2070 target, the availability of locally manufactured REPMs will accelerate the adoption of next-generation electric and energy-efficient commercial vehicles. This forward-looking policy is a major boost to Make in India and will enhance the long-term competitiveness of the automotive and commercial vehicle ecosystem,” he said.

For the automobile sector, localizing rare earth magnets will boost growth for both auto OEMs and component manufacturers, support clean energy powertrains, reduce import dependence, deepen the domestic value chain, and enhance long-term competitiveness. We welcome this vision and look forward to contributing to a robust, future-ready mobility landscape that supports India’s sustainable growth and its ambition to become a global automotive hub.”