The recent improvement in India and China relations has brightened the outlook for automobile sector and original equipment manufacturers, according to analysts.
In his two-day visit to India, Chinese Foreign Minister Wang Yi assured Indian counterpart S Jaishankar that the country will ease restrictions on exports to India of fertilisers, rare-earth minerals, and tunnel boring machines. Yi also met with Prime Minister Narendra Modi during the visit.
Indian automakers faced a real challenge when China imposed restriction on rare-earth mineral exports. Especially, concern rose on electric vehicle production and their penetration.
Modi will repay the visit by attending Shanghai Cooperation Organisation summit at Tianjin to be held later this month.
For automobile makers, China’s recent lifting of restrictions on rare earth magnets are crucial. These magnets are used for electric vehicles, wind turbines, electronics and other applications.
“China lifting rare earth magnet export restrictions to India will immediately ease supply bottlenecks for automakers and OEMs, allowing companies to restore volume targets, and reduce reliance on costly alternative sources,” said Anshul Jain, head, research at Lakshmishree. “OEMs will revert to Chinese suppliers to meet urgent demand for components like permanent magnet motors, sensors, and ignition coils.”
In April, China, which accounts for 60% of global supply of rare earth minerals, put an export curb as it engaged in a tit-for-tat tariff war with the US then.
As per analysts, it will take three-to-four weeks for the supplies to India to resume smoothly, and its effect to be reflected in companies’ operations.
Following this, Indian automakers and OEMs expressed their concern over near-term challenges related to rare-earth mineral supply. Bajaj Auto Executive Director Rakesh Sharma said, while speaking to NDTV Profit, that there are short-term challenges due to supply issue in rare-earth minerals, which will impact its second quarter production by 50% for scooters and 30% for three wheelers.
Also, in a move to support automakers and OEMs, India’s Ministry of Heavy Industries has proposed a Rs 1,345-crore scheme to ramp up domestic production of rare earth magnets.
The Mines and Minerals (Development and Regulation) Amendment Bill 2025 was passed in the Parliament which has six amendment. The legislation’s primary aim is to develop the mineral market. However, it also intends to address the rare-earth mineral supply issue and create self-reliance in the space.
However, it is important to note that despite improving diplomatic relation between India and China, Indian automakers may keep diversifying their sources of such critical supply.
“We are too much dependent on China. The government is trying to come up with other sources and have production in India also. The problem is that it will take time,” research analyst Tapan Doshi said.
Nevertheless, the outlook for the auto sector has brightened before the festive season begins in India, with an assurance of rare-earth mineral supply resuming, along with the upcoming GST reforms.
. Read more on Auto by NDTV Profit.