China’s Rare Earth Magnet Restriction Sparks Production Concerns for Bajaj Auto, TVS Motor

India’s electric vehicle (EV) sector is facing fresh supply chain disruptions following China’s restrictions on rare earth magnet exports—essential components for EV motors. After Bajaj Auto recently flagged production risks, TVS Motor Company has now voiced similar concerns about potential output impacts and cost increases.

Impact on TVS Motor and the EV Industry

Sudarshan Venu, Managing Director of TVS Motor Company, highlighted during a June 2 interview with CNBC-TV18 that the effect of China’s export restrictions will likely manifest in production slowdowns by June or July. He stressed that the electric two-wheeler segment, which relies heavily on rare earth magnets sourced mainly from China, could face significant disruption.

The supply chain turbulence could cause production halts and possible price hikes in the near to medium term, as Indian manufacturers scramble to find alternative sources or solutions. Venu acknowledged efforts underway to de-risk the supply situation but cautioned about inevitable cost pressures emerging down the line.

The Urgent Need for a Domestic EV Supply Chain

Venu emphasized the critical need for India’s EV industry to build a strong domestic supply ecosystem for essential components like rare earth magnets. He stated, “The auto industry must build a robust domestic ecosystem for such critical materials. Developing a self-reliant supply chain is a necessity.”

Currently, Indian importers—such as TVS Motor’s vendors—are required to self-declare the intended end use of rare earth magnets and undergo a multi-step certification process involving Indian authorities and the Chinese Embassy before clearance. About 30 such applications have cleared the Indian regulatory stages but still await final approval from Chinese authorities.

Challenges in Finding Alternatives to China’s Rare Earth Supply

China dominates roughly 90% of global rare earth magnet production, making it difficult to quickly find alternative sources. Developing substitutes demands significant time and investment for testing, validation, and integration, meaning viable alternatives will likely only emerge in the medium term.

Last week, Bajaj Auto described the situation as a “dark cloud on the horizon” during its Q4FY25 earnings call, warning of serious production risks as soon as next month if supply issues remain unresolved. Although formal certification processes exist to ensure these materials are not diverted for military use, the future of shipments from China remains uncertain.

TVS Motor Share Price Reaction

As of about 11 am on June 2, TVS Motor shares traded at Rs 2,748 on the NSE, down 1% from the previous close. The stock has gained around 16% since the start of the year but is now facing headwinds amid supply concerns.

Highlights:

• TVS Motor warns of production impact from China’s rare earth magnet export curbs, with effects expected by June or July.

• Rare earth magnets, vital for EV motors, are primarily sourced from China, which controls 90% of global supply.

• Indian importers must complete multi-step certification for magnet imports, with approvals still pending from China.

• Supply disruption could cause production halts and price increases in the near to medium term.

• TVS Motor stresses urgent need for developing a domestic EV supply chain to reduce dependence on China.

• Bajaj Auto had earlier raised similar concerns, describing the situation as a “dark cloud on the horizon.”

• TVS Motor shares declined 1% amid these developments, though the stock has gained 16% year-to-date.