India is considering relaxing its strict 50% localization requirements for electric vehicles (EVs) as China’s recent rare earth export restrictions create a supply chain crisis, impacting manufacturers and enthusiasts alike. According to a Bloomberg report, this potential policy shift comes after China’s April curbs on rare earth exports—key materials for EV traction motors—put local production goals at risk.

Easing Localization to Counter Supply Disruptions

The Indian government is open to adjusting the 50% localization mandate, which requires EV makers and suppliers to produce half their components domestically to receive incentives. Sources familiar with the matter told Bloomberg:

“India is amenable to relaxing the 50% localization it expects from electric vehicle makers and suppliers in return for incentives, after China’s curbs on rare earths exports put the goal in doubt.”

This change aims to prevent production halts, with India advising automakers to import fully-built motors or assemblies as a temporary fix. The Ministry of Heavy Industries has yet to comment, keeping the industry in suspense.

Technical and Economic Challenges for EV Makers

Rare earth elements are vital for permanent magnet synchronous reluctance motors (PMSRM), used in EV traction systems. China’s export restrictions threaten the Production-Linked Incentive (PLI) program, which offers financial support to boost local manufacturing. A prolonged supply disruption could force Indian original equipment manufacturers (OEMs) to import fully made parts, undermining self-reliance efforts. One source noted:

“Shipping a motor by sea would add around 2,000 rupees ($23.24 USD) per unit, while air freight could raise costs by up to 5,000 rupees ($58.10 USD) for electric two-wheelers—a steep hike for a mass-market vehicle part.”

This cost increase hits hard, especially for component makers who invested heavily in localizing PMSRM and magnet-based assemblies. Another source added, “Many have yet to qualify for PLI disbursements and now face the risk of losing business to Chinese suppliers.”

Industry Trends and Implications for EV Owners

The curbs deliver a “double blow” to India’s EV sector, as noted by Bloomberg, with automakers like Bajaj warning of potential output threats. Companies are exploring imports from China, while the global reliance on China’s 60% share of rare earths pushes the industry toward alternative supply chains. For EV owners, this could mean delayed models or higher prices. Long-term, the crisis may spur innovation in sustainable materials, reshaping the EV landscape and offering new opportunities for enthusiasts.

Photo courtesy of Tata Motors.