Automakers Scramble for Rare Earth Alternatives as China Tightens Export Controls

Global Supply Chain Crisis Looms

Automotive manufacturers are reportedly engaged in a worldwide search for rare earth materials as China prepares to implement significant export controls beginning November 8, according to industry analysis. The situation has created what sources describe as a tense environment, with executives concerned about potential parts shortages and manufacturing disruptions.

Global Supply Chain Crisis Looms
China’s Dominance in Critical Materials
Limited Options Beyond Chinese Supply
Recycling Efforts Face Scaling Challenges
Automakers Develop Alternative Technologies
Logistical and Competitive Challenges
Industry Executives Express Grave Concerns

China’s Dominance in Critical Materials

Consultancy AlixPartners estimates indicate China controls up to 70% of global rare-earth mining, 85% of refining capacity, and approximately 90% of rare-earth metal alloy and magnet production. The new export control list includes elements like ytterbium, holmium and europium, all critical for automotive manufacturing., according to technology trends

“The situation is very tense,” said Nadine Rajner, CEO of German metal-powder supplier NMD, adding that customers want to source rare earths from anywhere but China. Industry reports suggest that for heavy rare earths specifically, China controls 99.8% of global refining capacity, making alternative sources negligible.

Limited Options Beyond Chinese Supply

Analysts suggest that while rare earth deposits exist in countries like Sweden, most lack the mining infrastructure and refining capacity to make them usable for industrial applications. An executive at a magnet supplier for Hyundai reportedly stated that while inventories were built earlier this year, “most have already been depleted” and supplies remain tight.

Some Chinese rare earth exporters received a rush of orders from overseas clients immediately after new export controls were announced on October 9, according to three industry sources familiar with the matter.

Recycling Efforts Face Scaling Challenges

Rare earth recycling from end-of-life vehicles presents a potential solution, but industry experts indicate this sector remains in its infancy. Neutral, a Renault-backed company, currently recycles rare earths from approximately 400,000 cars annually in France and has contracts with 15 European brands.

However, Neutral CEO Jean-Philippe Bahuaud stated that “the challenge is scaling up these activities,” suggesting that recycling alone cannot currently meet industry demand.

Automakers Develop Alternative Technologies

Major manufacturers including General Motors and suppliers such as ZF and BorgWarner are reportedly developing EV motors with low-to-zero rare-earth content, while BMW and Renault have already produced rare earth-free motors. UK firm Monumo has used AI and deep-tech simulation to help clients reduce rare earth content in existing motors by an average of 24%, according to CEO Dominic Vergine.

Despite these innovations, industry experts suggest most rare earth-free motors remain years away from widespread implementation, as do efforts to develop new mines and processing facilities outside China.

Logistical and Competitive Challenges

Even if Chinese suppliers can fulfill orders before the November 8 deadline, the sea journey to Europe can take 45 days, creating potential bottlenecks. Meanwhile, analysts suggest China can undermine alternative development efforts by maintaining low prices.

“The Chinese can always undercut them,” said Andy Leyland, co-founder of supply chain specialist SC Insights, referring to efforts to develop rare-earth free motors. He added that automakers may find it difficult to justify more expensive components when cheaper alternatives with rare earth magnets remain available.

Industry Executives Express Grave Concerns

“They can shut us down in two months, the entire auto industry,” said Ryan Grimm, Toyota Motor’s North America group vice president of purchasing supplier development. Bruno Gahery, president for France, Benelux, West and South Europe at supplier Bosch, stated he expects the automotive industry to “overstock rare earths” ahead of the deadline.

Jan Giese, a senior manager at rare-earth trader Tradium, warned that “this is not the end of export controls,” suggesting continued Chinese influence over global rare earth supplies.

For general reference information about rare earth elements, see this overview.

References & Further Reading

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