Big concern for India’s auto industry as Pakistan’s friend China bans export of…

China has reportedly banned the export of rare earth magnets to India post Operation Sindoor in which Pakistan, Beijing's "all-weather ally" suffered a crushing defeat at the hands of Indian Armed Forces.

In a major move that could bring India’s auto industry to a grinding halt, China has reportedly banned the export of rare earth magnets post Operation Sindoor in which Pakistan, Beijing’s “all-weather ally” suffered a crushing defeat in the recent military conflict with India. According to a media report, China has demanded assurances from the Indian government that these magnets will not be used in defense manufacturing, or re-exported to the US via India.

Quoting sources, a report by ET said that the export of permanent magnets other electronic goods from China has resumed after assurances from the Indian side. As per officials, the Directorate General of Foreign Trade (DGFT) has issued 30 certificates, one for each consignment of rare earth magnets, which are used in electric vehicles (EVs), as well as electronic systems in regular cars.

Earlier, industry insiders had warned that China could halt exports of rare earth elements to India. A Reuters report, citing documents from company officials and industry groups, had warned that that auto-parts makers would run out of stocks of rare earth magnets by the end of May.

India automakers seek govt intervention

In a statement, the Society of Indian Automobile Manufacturers (SIAM) had urged the Indian government to intervene in the matter, citing the danger of a major crisis hitting the world’s third-largest car market if the supplies are halted.

On May 19, SIAM met Commerce Ministry officials, and submitted an internal document which warned that India’s auto industry could likely come to a complete halt by late May or early June, if the exports from China were not resumed. Representatives of country’s top carmakers, including Maruti Suzuki, Mahindra & Mahindra and Tata Motors were present in this meeting.

The SIAM document has urged the government to expedite the approval of import applications, and put pressure on Chinese authorities to accelerate licenses on an urgent basis.

According to Reuters, a few Chinese magnet producers have received permission to resume exports, but industry insiders fear that approvals may face prolonged delays due to the current tensions in India-China relations.

China dominates rare earth magnets industry

According to official estimates, China controls more than 90% production of rare earth magnets, and imposed restrictions on their export in April in response to the tariffs imposed by US President Donald Trump, China has reportedly informed automakers to acquire import permits from Chinese authorities, and while the ban is mostly on high-performance magnets, shipments of low-cost magnets have also been stopped due to confusion in the implementation of the new export rules.

The process of importing rare earth magnets from China is a very complicated one as it requires approvals from several Indian ministries and submission of an end-use certificate, which guarantees that these magnets will not be used in defense manufacturing or exported to other countries such as the US without Beijing’s explicit permission.

These documents are then verified by the Chinese embassy in New Delhi and sent to Chinese suppliers, after which Beijing issues export licenses.

Queried about export restrictions imposed on India, Chinese Embassy officials said they are actively working on facilitating and streamlining trade compliance in accordance with legal and regulatory requirements. The embassy reiterated that the primary purpose of imposing imposing export controls on rare earth elements was to safeguard the interests and national security of China.

India’s rare earth magnet imports

As per customs data, Chinese exports of permanent magnets  fell 51% to 2,626 tonnes in April after the export ban came into force, while India imported 460 tonnes of rare earth magnets, most of which came from China, in the financial year that ended on March 31, 2025.

According to industry estimates, India expects to import 700 tonnes of magnets worth $30 million this year.