In a major disruption for the Indian electric vehicle (EV) and auto component industry, China has halted the export of rare earth magnets to India, demanding stringent documentation and end user certification. As a result, Tata Motors Ltd. and Mahindra & Mahindra Ltd. shares fell on April 25, reversing early gains.

This sudden restriction has put Indian EV manufacturers and component suppliers under pressure, especially as rare earth magnets are essential to traction motors and several critical EV components. These developments pose a significant threat to India’s EV growth momentum and have led manufacturers to approach the Indian government for urgent resolution.

What Are Rare Earth Magnets and Why Are They Important?

Rare earth magnets are a critical component in electric vehicles. They are used in traction motors, power steering systems, battery cooling fans, and various sensor systems in EVs. These magnets are typically composed of neodymium, praseodymium, dysprosium, and samarium, elements that China has a near-monopoly over in terms of production and export.

Without a stable supply of these magnets, EV manufacturing can come to a halt or face major delays, impacting both delivery schedules and cost structures of vehicle makers.

China’s New Export Conditions for Rare Earth Magnets

According to sources reported by CNBC-TV18, China has not only stopped the direct supply of rare earth magnets to India from April 4, but has also mandated importers to provide end user certificates that are:

• Signed by India’s Ministry of External Affairs

• Cleared by the Chinese Embassy in India

Moreover, China has explicitly asked for assurance that these magnets will not be used in weapon manufacturing or supplied to third parties. This level of control and certification has made the import process more bureaucratic and time-consuming, causing production delays across India’s auto and EV sectors.

Immediate Impact on Tata Motors and Mahindra & Mahindra

Both Tata Motors and Mahindra & Mahindra have been at the forefront of India’s electric vehicle revolution. However, this supply disruption has led to visible nervousness in the stock market.

• Tata Motors, which saw a 23% rise in EV registrations in Q3 due to newly launched models, has lost 2% in stock value, closing at ₹655.55.

• Mahindra & Mahindra shares also fell 1.7% to ₹2,856.70, reacting to the industry-wide implications.

This decline in share prices is reflective of investor concerns around production disruptions, extended timelines, and uncertain input costs.

Industry Urges Government Intervention

In response to this escalating situation, industry bodies and major component makers have approached the Indian government, seeking immediate diplomatic and trade-level discussions with China.

The EV sector is heavily dependent on imports for critical components, and India does not yet have the infrastructure to manufacture rare earth magnets domestically at the required scale. While there are ongoing talks about setting up domestic production facilities for rare earth elements, these are long-term solutions.

In the short term, the industry needs the government to:

• Negotiate with Chinese authorities to ease the certification process

• Identify alternate global suppliers for rare earth magnets

• Encourage domestic companies to fast-track production capabilities

Potential Alternatives and the Road Ahead

Experts believe that while alternate sources like Australia, Vietnam, and the US exist, setting up new supply chains and establishing compliance protocols can take months, if not years. Meanwhile, India’s push for EV adoption through subsidies and policy reforms could face headwinds due to this component supply crunch.

There’s also the risk that vehicle prices could rise if the input cost of magnets goes up due to alternative procurement, directly impacting consumers.

Moreover, new product launches from Tata Motors and Mahindra may face delays, derailing both sales projections and market expansion plans.

Market Reaction and Investor Sentiment

Investors are closely watching the situation. With Tata Motors and M&M being index heavyweights, any prolonged disruption could also impact broader auto indices and EV-related portfolios.

Brokerages may revise target prices and growth forecasts for these companies if the rare earth issue isn’t resolved soon.

Final Thoughts

The halt in rare earth magnet exports from China to India is more than just a supply chain issue—it’s a geopolitical and strategic challenge that could impact the future of India’s green mobility mission.

Tata Motors and Mahindra, leaders in India’s EV segment, are at a critical juncture where component availability could decide their near-term success or struggle.

As the government steps in and dialogues are initiated, all eyes will remain on how fast a resolution can be achieved and whether India can begin building a sustainable and independent EV ecosystem free from such supply vulnerabilities.

The Upcoming IPOs in this week and coming weeks are Ather Energy, Iware Supplychain Services, Arunaya Organics.

The Current active IPO are Tankup Engineers.

Start your Stock Market Journey and Apply in IPO by Opening Free Demat Account in Choice Broking FinX.

Join our Trading with CA Abhay Telegram Channel for regular Stock Market Trading and Investment Calls by CA Abhay Varn - SEBI Registered Research Analyst.