Sona Comstar Leads India's Push for Rare Earth Independence as China Tightens Export Controls

Sona Comstar, one of India's largest auto component makers and the country's biggest importer of rare earth magnets, plans to start manufacturing rare earth magnets domestically, its CEO Vivek Vikram Singh told Reuters in an interview. The move comes as China, which produces around 90% of the world's rare earth magnets, put restrictions in April on their exports as part of its response to U.S. tariffs, creating severe supply disruptions for India's rapidly growing electric vehicle industry.

Strategic Response to Supply Crisis
The announcement comes as India's automotive sector faces significant supply chain challenges. "Being the largest importer of rare earth magnets, we are the single largest affected party in the country. We have to look at India's self-sufficiency on magnets and are working with the government on it," Singh explained, highlighting the urgency behind the company's strategic pivot.

Gurgaon-based Sona Comstar, officially known as Sona BLW Precision Forgings, has emerged as the first major Indian company to announce concrete plans for domestic magnet production following the government's new incentive program. The company, which supplies gears and motors to car makers such as Tesla and Stellantis, imported 120 metric tonnes of magnets from China in the last financial year and had ambitious plans to import 200 tonnes this year to meet growing demand from electric vehicle customers.

The Scale of the Challenge
The rare earth supply disruption has highlighted India's dependence on Chinese imports in a sector experiencing rapid growth. According to industry data analyzed in recent automotive trade publications, India was estimated to be the fifth-largest importer of rare earth permanent magnets and magnet alloys from China last year, importing nearly 2,850 tonnes—a staggering 49% increase over 2023, representing the fastest growth among the top five importing countries globally.

The implications extend far beyond simple supply shortages. Rare-earth magnets, particularly neodymium-iron-boron (NdFeB) compounds, are essential components in modern electric vehicle powertrains, offering superior power-to-weight ratios and efficiency that conventional alternatives cannot match. These magnets are also critical in power steering systems for both electric and internal combustion engine vehicles, as well as in digital systems across the automotive industry.

China's Stranglehold and Complex Export Procedures
China's dominance in rare earth production extends beyond raw materials to include approximately 90% of global refining capacity, creating supply constraints that have affected international supply chains. The new export restrictions implemented in April have created a byzantine approval process that industry executives describe as deliberately obstructive.

The intricate system now mandates multiple layers of approval: endorsements from India's Directorate General of Foreign Trade under the Ministry of Commerce, clearances from the Ministry of External Affairs, approval from the Chinese embassy in New Delhi, and final export clearance from Chinese provincial and central authorities. "This is a major supply chain disruption, especially for electric vehicles as rare earth metals are used extensively in the electric motors which is a core component," noted Rajat Mahajan, Partner and Automotive Sector Leader at Deloitte India.

Industry Concerns
The supply constraints have prompted warnings from major Indian automakers. Bajaj Auto's Executive Director Rakesh Sharma recently warned that "supplies and stocks are getting depleted. And if there is no relief and there are no shipments, then July production will get seriously impaired." Similarly, TVS Motor's Managing Director Sudarshan Venu predicted that "the impact of the ban will begin to reflect in production by June or July," with particular concerns about the electric two-wheeler segment.

The timing could not be worse for India's automotive ambitions. Major manufacturers including Mahindra & Mahindra, JSW MG Motor India, and Tata Motors are aggressively pushing sales of recently launched electric models, while Maruti Suzuki is preparing to launch its first electric model, the e Vitara, in the coming months.

Government Response and Strategic Initiatives
India is preparing to launch a production-linked incentive (PLI) scheme worth between ₹3,500 crore and ₹5,000 crore to promote the domestic manufacturing of rare earth minerals and derived magnets, with the scheme expected to be notified within the next 15 days. This represents a critical step toward reducing the country's strategic vulnerability in this sector.

The government's response has been multi-pronged. Beyond financial incentives, India has been taking steps to conserve its own rare earth resources. In a recent meeting with auto and other industry executives, Indian Commerce Minister Piyush Goyal asked IREL to stop its exports of rare earths, mainly neodymium, a key material used in magnets for electric vehicle motors, redirecting strategic reserves toward domestic consumption.

Innovation and Alternative Technologies
While waiting for domestic production capabilities to mature, Indian companies are simultaneously pursuing alternative technologies. The crisis has accelerated research into magnet-free electric motor designs and alternative magnetic materials.

Three notable startups are leading this charge:
Conifer.io, a California-headquartered startup with a manufacturing plant in Pune, is developing innovative ferrite-based motors that eliminate dependence on rare earth magnets entirely. Co-founder Ankit Somani explained that their technology increases magnetic flux from the motor's stator to compensate for ferrite magnets' lower magnetic strength, achieving 10-15% higher power density and up to 30% greater efficiency compared to traditional rare earth-based systems.

Chara Technologies is developing Synchronous Reluctance Motors (SynRMs) that operate without permanent magnets, using air gaps and metallic components to create magnetic reluctance. Despite being 10-15% heavier than traditional motors, their 5.7-kilowatt SynRMs deliver 94% peak efficiency and provide superior range performance.

Shakti Pumps, a BSE-listed manufacturer, is branching into EV mobility with high-efficiency induction motors that are completely magnet-free, designed for dynamic driving conditions with enhanced durability.

Economic and Strategic Implications
The financial stakes are substantial. The India rare earth magnet market size reached USD 637.4 Million in 2024. Looking forward, IMARC Group expects the market to reach USD 993.0 Million by 2033, exhibiting a growth rate (CAGR) of 5.1% during 2025-2033. For Sona Comstar specifically, the company has demonstrated robust financial growth, with Singh citing a five-fold increase in revenue to more than $400 million over the past five years, providing the financial foundation necessary for domestic manufacturing investments.

The company's customer diversification also provides strategic advantages. The U.S. currently accounts for about 40% of Sona Comstar's revenue, ahead of India and Europe, though recent acquisitions are expected to shift the majority of revenues to India this year. This geographical spread helps insulate the company from regional supply chain disruptions while positioning it to serve growing global demand for electric vehicle components.

Industry Transformation and Future Outlook
The rare earth crisis represents both a significant challenge and a potential transformation catalyst for India's automotive industry. According to ICRA estimates, rare earth magnets comprise approximately 30% of motor unit costs in electric two-wheelers, with motors priced between Rs 8,000 and Rs 15,000 depending on specifications. This cost structure makes domestic production economically viable with appropriate government support.

The broader implications extend beyond immediate supply security. As one industry executive noted, "Electric vehicles are India's new ticket to energy independence, but rare earths are the new oil." The current crisis has highlighted the strategic importance of developing indigenous capabilities in critical materials and technologies.

Diplomatic Efforts and Short-term Solutions
While long-term domestic production capabilities are being developed, India is also pursuing diplomatic solutions. The government is planning to send a delegation of automotive industry leaders to China within the next 2-3 weeks to discuss restoration of magnet supplies. However, Minister of Heavy Industries HD Kumaraswamy has indicated that government officials will not be part of this business-focused delegation.

This approach mirrors similar efforts by other nations. Japanese business delegations are planning visits to Beijing in early June, while European diplomats from major automotive nations have initiated emergency meetings with Chinese officials in recent weeks.