Among the key measures under consideration are importing fully assembled motors directly from China; exporting rotors to China for magnet assembly and re-importing the finished components; using engineered substitute materials designed to replicate the performance of rare-earth magnets without technically qualifying as such; and transitioning to magnet-free motor technologies, such as those using electromagnets or inductive systems.
While these options offer potential lifelines, they are not without significant challenges. According to ratings agency ICRA, each solution is “ridden with logistical, regulatory, and engineering complexities,” requiring accelerated testing, validation, and supply chain restructuring to implement effectively.
“The auto industry is staring at another supply-side disruption, not unlike the semiconductor shortage of 2021–22,” said Jitin Makkar, Senior Vice President and Group Head – Corporate Ratings, ICRA. “This time, it’s rare-earth magnets—crucial for EV traction motors and power steering systems—whose availability is under threat due to export controls and shipment delays from China.”
Neodymium-iron-boron (NdFeB) magnets, prized for their magnetic strength and efficiency, are predominantly sourced from China, which supplied about 85% of India’s $200 million worth of rare-earth magnet imports in FY2025. In contrast, lower-performance ferrite magnets are used in non-critical applications such as wiper motors and window regulators.
The shortage casts a shadow over India’s ambitious EV goals. Motors in electric two-wheelers alone derive nearly 30% of their cost from rare-earth magnets, with unit prices ranging between ₹8,000 and ₹15,000. If unresolved, the supply disruption could severely affect both internal combustion engine (ICE) and EV manufacturing.
“The crisis is real, but so is the opportunity,” Makkar added. “This could be the trigger India needs to accelerate innovation and diversify both its sourcing strategies and motor technologies.”
The road ahead may be complex, but industry stakeholders agree: finding sustainable alternatives is now not just about cost or convenience—it’s about continuity.
The stakes are significant. As Indian manufacturers strive to stabilise their supply chains, the overreliance on a single source for critical components like rare-earth magnets has emerged as a major vulnerability. While the current disruption poses serious challenges, it could also become a turning point—driving innovation and encouraging strategic diversification in both sourcing strategies and technological development, said the rating agency.