Car industry hit by new rare earth minerals crisis

The global car industry has been thrown into yet another major crisis, following China’s decision to restrict rare earth minerals and magnets needed for everything from electric motors and alternators to switches for electric windows.

The self-imposed limit on what it exports was triggered by China in response to the ongoing trade war with the US over import tariffs.

With many now already predicting that the lack of rare earth minerals will herald another semiconductor-like crisis, some car-makers and suppliers have already idled factories while execs desperately try to secure new supplies – an almost impossible task, say some analysts.

China reportedly controls 65 per cent of global mining and 88 per cent of refining of rare earth minerals. Worse still, almost all the world’s terbium – needed for magnet production in e-motors – is produced by the Chinese.

China only started restricting the export of rare earth metals on April 4 in response to the US tariffs, with some suppliers already hit with supply issues. Now more car-makers are set to press pause on production around the globe in coming weeks.

It’s believed some car-makers and suppliers are now considering shifting manufacturing to China to safeguard against any future restrictions.

While it’s still early days, German supplier giant ZF’s Mathias Miedreich said that the impact of the lack of raw materials from China could lead to a fall in new car production in the second half of this year, comparing the latest crisis to the semiconductor shortage that saw 17 million fewer cars made between 2021 and 2023.

“There are so many magnets and rare earths in vehicles that, just statistically, there will be one or the other component that will not be able to be shipped, so the car cannot be built,” said Miedreich in a media briefing.

While ZF said it has received export approvals in China it said it was aware of other companies in the supply chain that now had bottlenecks in supply.

ZF has now lowered its production forecasts for the second half of 2025 and expects that tariff-induced fall for new vehicles would also impact the industry globally.

Automotive News has reported at least one major car-maker has been holding daily calls with suppliers for weeks to assess the impact of the limited supply of rare earth minerals.

Officially, the Volkswagen Group has told the newswire that it had not yet experienced any impact from the Chinese export restrictions, while Ford says it is continuing to monitor the situation.

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