BMI, a Fitch Solutions company, reports mounting strain across the global automotive industry amid new rare earth export restrictions introduced by Mainland China.
Analysts at BMI caution that a recently implemented licensing system has significantly delayed magnet shipments, critical components in electric vehicle (EV) motors and modern vehicle subsystems, raising the risk of production halts across major automakers.
Go deeper with GlobalData
The restrictions come in the wake of increased US tariffs on Chinese goods, prompting the EU to urge Beijing to ease its controls. According to BMI, the delays threaten to derail their near-term forecasts for global vehicle production, which currently predict a 2.3% rise in 2025 to 95.8 million units following a slight contraction in 2024.
“The new bottlenecks in rare earth magnet supply pose significant downside risks to global vehicle output,” BMI analysts warn, pointing to recent disruptions at Ford, Suzuki, and broader warnings from Germany’s VDA industry group. EV production is expected to be hit especially hard, given its heavier reliance on these magnets compared to internal combustion engine (ICE) vehicles.
Europe’s auto sector is particularly vulnerable, BMI notes, as 98% of its rare earth magnets are imported from China, which holds 90% of global processing capacity. While the EU’s Critical Raw Materials Act aims to bolster domestic capacity, BMI emphasises that European processing lacks both cost competitiveness and scale, making the bloc heavily dependent on Chinese suppliers.
As the crisis unfolds, BMI anticipates shifts in sourcing strategies, including potential relocations of production to China despite tariff implications, and a rollback of certain non-essential vehicle features to reduce reliance on rare earths. Some automakers may even consider reverting to older EV motor designs that require fewer critical minerals.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataBMI concludes that the current disruption underscores the fragility of automotive supply chains in the face of strategic material bottlenecks, particularly as global electrification efforts intensify.
