China‘s tightened export controls on rare-earth minerals, critical for electric vehicle (EV) production, have sent automakers and suppliers into a frenzy, with some factories facing potential shutdowns by mid-July 2025. Reuters reports that the restrictions, targeting elements like gallium and germanium, are disrupting global supply chains, forcing the EV industry to seek urgent alternatives.

Supply Chain Shock Hits EV Production

The EV sector relies heavily on rare-earth magnets for motors powering components from windshield wipers to braking sensors. China controls roughly 90% of global rare-earth magnet production, according to consultancy AlixPartners. An average EV uses about 1.1 pounds (0.5 kg) of rare-earth elements, double that of a fossil-fuel car, per the International Energy Agency. With Chinese export permits now under strict review, European auto-supplier plants have already halted operations, and more outages loom, warns Benjamin Krieger, Secretary-General of CLEPA, who stated, “Sooner or later, this will confront everyone.”

Frank Eckard, CEO of German magnet maker Magnosphere, described the industry’s desperation: “The whole car industry is in full panic. They are willing to pay any price.” His firm has been inundated with calls from automakers seeking backup supplies to keep assembly lines running.

Scrambling for Solutions

Automakers like General Motors and BMW, alongside suppliers such as ZF and BorgWarner, are racing to develop motors with minimal or no rare-earth content. However, scaling these technologies remains years away. Minneapolis-based Niron, backed by over $250 million from investors including GM, is developing rare-earth-free magnets and plans a $1 billion plant by 2029. CEO Jonathan Rowntree noted, “We’ve seen a step change in interest from investors and customers” since the export curbs began.

Innovations like England’s Warwick Acoustics, which developed rare-earth-free speakers for a luxury car debut later this year, show promise but won’t reach mainstream models for about five years, according to CEO Mike Grant. Meanwhile, Mercedes-Benz is working with suppliers to build rare-earth stockpiles, while others may resort to producing incomplete vehicles, as seen during the 2021–2023 semiconductor shortage.

Industry Trends and Challenges

China’s dominance—controlling 70% of rare-earth mining and 85% of refining—leaves the EV industry vulnerable. Past disruptions, like the 2010 Japan export curb, pushed countries to diversify, yet progress is slow. The EU’s Critical Raw Materials Act aims to bolster local sources, but Noah Barkin of Rhodium Group said it “has not moved fast enough.” Even firms with viable alternatives, like German recycler Heraeus, struggle to compete with China’s low prices, operating at just 1% capacity, according to co-head David Bender.

Economic impacts are significant. Rare-earth price spikes could raise EV production costs, potentially increasing sticker prices for consumers. Regulatory efforts to reduce dependency face hurdles, as new mining projects, like NioCorp’s Nebraska site set for 2028, require years to scale. Mark Smith, NioCorp’s CEO, emphasized, “China has had a rare-earth card to play whenever they wanted to.”

De cara al futuro

The crisis underscores the EV industry’s fragile reliance on China, which also controls over 50% of 19 other key materials like graphite, per a 2024 European Commission report. Andy Leyland of SC Insights called the restrictions “a warning shot,” signaling potential future leverage. As U.S.-China trade talks begin in London on June 9, 2025, automakers face a dual challenge: averting immediate production halts while investing in long-term supply chain resilience.