Rare-earth Permanent Magnet Scheme Targets India’s China Dependence

China’s Rare-Earth Export Curbs Remain Suspended

China’s October 2025 export curbs on rare earths remain suspended rather than withdrawn, with the suspension running only until November 10, 2026, according to the BCG-ACMA report Beyond Resilience, released in September 2026. The report cites data available as of August 2026 and identifies the expiry in a source note to its exhibit on structural raw material shocks. It places the suspension alongside several dependencies that have not materially changed since the supply disruption in 2025, keeping access to critical materials a continuing strategic concern for manufacturers.

India Remains Highly Dependent on China

India sources about 85% of its rare-earth magnets from China, while China controls roughly 90% of global rare-earth processing capacity. When Beijing placed rare-earth magnets under export licensing in 2025, Chinese exports fell about 74% year over year in May 2025. Indian manufacturers were left holding only a few weeks of stock, exposing the limited short-term resilience of the domestic supply chain. The disruption demonstrated that dependence on overseas processing capacity can quickly become an access constraint for industries requiring rare-earth magnets.

EV Production Was Directly Affected

The supply disruption reached vehicle production lines, with passenger vehicle and two-wheeler manufacturers cutting or deferring electric-vehicle output. The BCG-ACMA report records that one leading OEM scaled back its new EV model output plans by about two-thirds during 2025. Supply to India eased only by September 2025, highlighting how quickly material-access constraints can affect vehicle programs. The episode also showed that manufacturers with limited flexibility in motor design or material selection can face greater exposure when critical inputs become temporarily unavailable.

Multiple Critical Minerals Create Structural Exposure

Rare earths are one of four exposures the report classifies as structural rather than cyclical. China placed graphite, gallium and germanium under export licensing in 2023 and antimony in 2024. Battery-grade graphite processing is almost entirely concentrated in China, while India imports nearly all of its lithium-ion cells, leaving the EV battery chain heavily dependent on Chinese supply even as domestic cell manufacturing expands. Gallium traded at roughly 2.5 times pre-control prices in 2025. Gallium, germanium and antimony are also included on India’s 2023 list of 30 critical minerals, while the report notes that a large Indian battery maker reported lower expected income because of higher antimony prices.

Domestic Magnet Capacity Is Becoming a Policy Priority

The report frames these vulnerabilities primarily as risks of access rather than price, emphasizing that building domestic capacity will take time. Policy has moved toward reducing this exposure through the Rare-earth Permanent Magnet Scheme, which was approved in November 2025 with an outlay of about ₹7,300 crore. The scheme is intended to support domestic production of magnets used in EV motors, power steering and sensors. It targets roughly 6,000 tonnes of annual production and is designed to reduce India’s dependence on Chinese rare-earth magnet supplies.

Engineering Flexibility Can Reduce Supply-Chain Risk

Company-level responses in the report indicate that engineering capability can provide a faster mitigation lever than sourcing changes alone. One large driveline manufacturer that had invested heavily in in-house engineering moved from heavy rare-earth magnets to light rare-earth and rare-earth-free motors within two months during the crisis. This substantially limited its revenue loss while other companies were still responding to the disruption. Suppliers without design ownership had no equivalent flexibility because build-to-print manufacturers depend on the OEM’s engineering team to authorize material or component changes.

Smaller Companies Face Greater Second-Source Gaps

The broader resilience picture remains uneven across company sizes. The report finds that two-thirds of small companies have not qualified a second source for most critical inputs, compared with about one-third of large companies. Nearly two in three companies also lack a systematic sub-tier risk assessment that provides a consolidated view and follows a regular review cadence. These gaps mean that diversification is not limited to identifying alternative suppliers; manufacturers also need deeper visibility into lower-tier dependencies and sufficient engineering ownership to respond when critical materials become constrained.

Frequently Asked Questions

How long will China’s rare-earth export curbs remain suspended?
China’s October 2025 rare-earth export curbs remain suspended until November 10, 2026, rather than being permanently withdrawn. This distinction matters because the underlying supply-chain dependency has not materially changed. India still sources about 85% of its rare-earth magnets from China, while China controls roughly 90% of global processing capacity. The BCG-ACMA report therefore treats the issue as an access risk requiring longer-term resilience measures, including domestic magnet production, alternative motor designs, supplier diversification and stronger visibility into sub-tier supply-chain dependencies.