India seeks to reduce dependence on Chinese rare earth magnet imports through subsidies for domestic manufacturers amid supply constraints.
11 Jul 2025 | 1317 Views | By Kiran Murali
Amid constraints in the supply of rare earth magnets from China, the Indian government is working on a Rs 1,345 crore scheme to incentivise domestic magnet production, according to the Ministry of Heavy Industries HD Kummaraswamy.
"A scheme has been circulated to give subsidies for manufacturers [magnet]. It is ...
This is an Autocar Pro Plus article. Subscribe to continue reading.
Amid constraints in the supply of rare earth magnets from China, the Indian government is working on a Rs 1,345 crore scheme to incentivise domestic magnet production, according to the Ministry of Heavy Industries HD Kummaraswamy.
"A scheme has been circulated to give subsidies for manufacturers [magnet]. It is under inter-ministerial consultation," the minister told reporters on Friday. He had earlier said the Ministry of Heavy Industries has been in discussion with the Ministry of Mines for this scheme. The scheme will provide subsidies for companies processing rare earth elements into magnets.
Secretary in the Heavy Industries Ministry Kamran Rizvi said that a Rs 1,345 crore scheme has been circulated that would support "end-to-end" magnet production - rare earth oxide to magnets. The scheme will be sent to the Union Cabinet for approval once the inter-ministerial consultations are completed.
Rare-earth magnets play a critical role in the automotive industry, especially as the sector accelerates towards electrification, automation, and efficiency. These magnets are important, particularly for EVs, due to their higher performance in small form factors, enhanced energy efficiency and critical functionality in both powertrains and digital systems.
China produces 60% of the world’s rare earth elements and controls around 90% of the global refining capacity. At nearly 2,850 tonnes, India was estimated to be the fifth-largest importer of rare earth permanent magnets and magnet alloys from China last year.
In April, China implemented stricter rules on exporting rare-earth elements and related magnets, requiring import permits. These changes were initially seen as a response to tariffs imposed by the U.S., but the impact is now rippling across global automotive supply chains and other industries.
The import approvals from China are now difficult and complex. It mandates an end-use declaration confirming the magnets will not be used for military purposes, along with certifications from multiple Indian ministries, the Chinese embassy, and final export clearance from Chinese authorities, creating significant logistical hurdles for importers.
While China appears to be easing magnet supplies to Western nations, there has been no indication of similar relief for India. OEMs like Bajaj Auto and TVS Motors have already voiced their concerns publicly and warned of potential disruption in production. Companies and the government are urgently working to secure alternative supply chains before their production lines are forced to a standstill.
While a delegation of auto industry leaders awaits appointments from the Chinese government to visit Beijing to find a solution for the current magnet supply crunch, the Indian government is looking to boost domestic rare earth mineral production to reduce dependence on China in the long term.
China has decades of investment in rare earth R&D, spanning extraction, separation, metal-making, and magnet manufacturing, while India is still in its early stages. India’s annual rare earth production was limited to around 2,900 metric tons in 2022 and 2023, despite a reserve of over 7 million tons.
The government is looking at incentives for rare earth elements as part of a broader strategy to diversify its supply chain and mitigate its substantial dependence on Chinese sources.
Hyderabad-based Midwest Advanced Materials has expressed interest in magnet production. The company has committed to supplying 500 tonnes of magnets by the end of this year, with plans to increase production to 5,000 tonnes next year.
Government officials noted that the magnet made in India must be competitive globally. He highlighted that the price difference between rare earth oxides and rare earth magnets on the Shanghai stock exchange is minimal, hardly 5%.
Indian Rare Earth Limited (IREL), a public sector undertaking that specializes in mining and refining rare earth metals, is the sole repository of rare earths in India. They have enough rare earths to make 1,500 tons of magnets in a year.
Rare earth oxides are available in Japan and Vietnam as well, and efforts are going on to bring them from there.
Several auto component makers are also actively developing and researching alternatives to replace rare-earth magnets. Companies like Mahle, Valeo, Sterling Gtake, Sona Comstar, Greaves Cotton, Chara Technologies and Attron Automotive are all working on an alternative to rare-earth magnet motors or other systems.
While magnet-free motors or rare-earth-free magnets offer a path to reducing dependence on critical materials, many industry experts say these technologies come with their own set of challenges for mainstream adoption, especially in high-performance applications like electric vehicles.
Issues like lower power density, lower efficiency, and increased size and weight of motors are the major concerns, and those alternative technologies are yet to see any large-scale commercial usage.