Auto Industry Sounds Alarm Over China’s Rare Earth Export Restrictions

The global automotive industry is facing growing concerns over a critical shortage of rare earth elements as China tightens export controls, threatening to disrupt production lines across Europe and beyond.

Several automotive supplier plants in Europe have already suspended operations due to limited access to rare earth materials, according to CLEPA (the European Association of Automotive Suppliers). The group warns that more shutdowns are likely as stockpiles run dry.

China’s Export Curbs Hit Global Supply Chains

In early April, China’s Ministry of Commerce imposed export restrictions on key rare earth elements and magnets, essential for the automotive, energy, and defense sectors. The move followed a response to new U.S. tariffs on Chinese goods under former President Donald Trump.

These materials are vital for both internal combustion engine vehicles and electric vehicles (EVs). Since April, hundreds of export license requests have been filed with Chinese authorities, but CLEPA reports that only about 25% have been approved.

“With such an interconnected global supply chain, China’s export controls are already causing shutdowns in Europe’s auto supply sector,” said CLEPA Secretary General Benjamin Krieger.

German Auto Industry Raises Red Flags

The German Association of the Automotive Industry (VDA) echoed the warning, saying that the export curbs could soon halt production altogether if the situation continues.

“Although some licenses have been granted, it’s not enough to ensure smooth production,” VDA President Hildegard Müller told CNBC.
“Delays in customs clearance even for approved exports are compounding the issue. If the situation doesn’t improve soon, production delays and shutdowns are inevitable.”

Müller urged German and EU policymakers to push China to find a quick resolution, emphasizing the strategic importance of rare earth supply security as demand for critical materials surges in the global transition to clean energy.

Automakers Seek Alternatives

BMW confirmed that parts of its supply network were affected.

Volkswagen reported stable supply but acknowledged ongoing efforts by suppliers to secure necessary export licenses.

Mercedes-Benz said it had long-term strategies in place to mitigate raw material risks, including plans to reduce or eliminate the use of heavy rare earths like dysprosium in electric drives.

A Mercedes-Benz spokesperson added:

“We are developing new material compositions that aim to significantly reduce rare earth usage per vehicle unit.”

Japanese Carmakers Also Impacted

Japanese automaker Nissan is working with government agencies and industry groups to lessen the impact, with CEO Ivan Espinosa stating:

“We must keep our options open and continue exploring alternatives.”

Suzuki Motor reportedly suspended production of its Swift model due to rare earth shortages, according to Reuters.

Gain a competitive edge with up-to-date market intelligence from InfoFinance – follow us for the latest insights.