India’s Auto Industry Faces Uneven Impact from Rare Earth Delays

The ongoing challenge in securing rare earth materials from China is creating a diverse and unpredictable impact across India’s automotive sector, with the severity of the issue varying  among vehicle manufacturers and for specific models. While some automakers currently boast comfortable stock levels, others face imminent production hurdles, underscoring the critical need for diversified supply chains.

Currently, approximately 30 applications from Indian automakers are still awaiting clearance from the Chinese Ministry of Commerce concerning rare earth imports. This bureaucratic bottleneck has prompted urgent action from the Indian government, with multiple ministries providing support to decongest the issue, fostering hope for a resolution in the coming days. 

However, the immediate impact on manufacturers is largely dictated by their existing inventories. As Shailesh Chandra, President, SIAM,  during the Q1FY2026 industry performance noted, while some vehicle makers are quite comfortable at the  moment due to their current holdings, "There will be manufacturers for certain models where they will be facing issues" , he added. 

The stakes are high. If the rare earth issue remains unresolved, it "will definitely lead to supply issues across the industry, potentially disrupting manufacturing lines", Chandra further cautioned suggested. This looming threat has spurred manufacturers to actively look for alternative sources for these crucial materials.

The development  follows escalating supply chain turbulence triggered by China’s increasingly restrictive export controls. As the dominant player in global rare earth processing with over 90% control, Beijing’s policy shifts have sent tremors through the global and India’s automotive sector, which remains heavily dependent on imported components. Experts suggest that inventories of Indian auto companies for certain automotive applications that are dependent on rare earth supplies might be depleted by mid-July.

According to ICRA, Indian automakers are weighing several stopgap options: importing fully assembled motors from China; shipping rotors to China for magnet assembly and re-importing them; replacing rare earths with engineered alternatives; or adopting electromagnet-based motors. Each solution, however, comes with logistical and regulatory complexities and may require condensed development cycles to minimize disruption.