Auto companies flag China's magnet supply risks

NEW DELHI: Raising an alarm over challenges in procuring rare earth magnets from China, the auto industry has told govt that the matter will lead to stoppage of production of certain models from this week, while heading to a complete shutdown by the middle of next month.

China has put the export curbs on rare earth magnets to ensure they are not used for making defence and weapon systems.This threatens launch of many new models, apart from disturbing the entire value chain across passenger vehicles, two-wheelers, and commercial vehicles. Companies at risk of production disruptions include, Maruti Suzuki, Mahindra, Hyundai and Kia, Hero Moto, TVS, and Bajaj Auto.Over the past month, auto companies discussed the matter with various govt departments to get clarity regarding the process to be adopted for obtaining the EUC (end-use case).

On suggestions of the ministry of external affairs (MEA), they also had a discussion with the embassy of China in India. However, there has been no solution so far.The rare earth magnets are used for components like speedometers, electric motors, e-axles, electric water pumps, automatic transmission kits, speakers, sensors, and ignition coils in engines. Companies say an elaborate approval process has to be followed before the magnets can be procured, and a final approval from China's ministry of commerce is also required.

Heavy industries minister H D Kumaraswamy on Monday said govt is preparing to send a delegation of industry executives to China in two-three weeks to discuss the issue. Govt is working overtime to work out a solution to the issue, which began after the Chinese govt on April 4, imposed certain requirements in the export permit system for medium and heavy rare earth metals, its alloys, magnets and related products.On duration of inventory Maruti has before any impact on production, the automaker said it submitted an import application and it would be difficult to give "very specific details" until it receives a response.

"It is not a restriction. It is an endorsement of end-use. In case there is an issue, we will inform all our stakeholders, including the stock exchange," Rahul Bharti, senior executive director, corporate affairs, said.Bajaj Auto said the issue could have a "serious impact" on their EV production by July. The industry's warning comes even as delegations of industry body Siam and component makers ACMA plan to visit China "at the earliest" to expedite permissions to procure the magnets used across automotive applications, both in petrol, diesel engines and EVs.