Industry alarm grows as China tightens rare earth export curbs
The global automotive sector is sounding the alarm over China’s latest move to tighten export controls on rare earths and related technologies, warning that the measures could herald a period of supply-chain chaos for cars and the components that power them. Beijing’s Commerce Ministry announced expanded restrictions aimed at preventing the “misuse” of these minerals in military and other sensitive sectors, a decision that has quickly drawn concern from industry associations across Europe and beyond.
What the policy change means for automakers
China currently dominates the refining and processing of many rare earth elements that are essential for advanced EV batteries, permanent magnets, and semiconductor components. The new export curbs, following an earlier restriction in April, are expected to intensify already tight markets for key materials such as neodymium, praseodymium, and other rare earth magnets used in electric vehicle motors. In a sector where supply reliability translates directly into production planning and costs, the move could push up price volatility and complicate sourcing for automakers and suppliers.
European industry voices concern
The German Association of the Automotive Industry (VDA), which represents major carmakers and suppliers, warned that the regulations could have “far-reaching consequences for deliveries of the affected products to Germany and Europe,” as well as for onward transport. A VDA spokesperson told CNBC that the curbs will hit the battery and semiconductor industries “particularly hard, and thus also the automotive industry.” The group urged policymakers in Brussels and Berlin to engage actively with Beijing to seek a prompt, workable resolution that preserves supply continuity.
Impact echoed by European partners
Industry executives in Italy and the Netherlands echoed similar concerns. Roberto Vavassori, chairman of ANFIA, the Italian auto parts lobby, noted that while manufacturers had managed during a temporary disruption in the summer, buffer stocks of rare earth metals are now under pressure. “This buffer is not there anymore,” he said at a Milan conference reported by Reuters. ANFIA did not respond to a CNBC request for comment. The warning signals from ANFIA align with broader fears that the newest wave of restrictions will intensify the squeeze on critical materials used in modern vehicles.
Analysts weigh the logistics and timelines
Analysts caution that the full impact will unfold over time. Rico Luman, senior sector economist for transport and logistics at ING, highlighted China’s dominance—roughly 90% of global refinery capacity—creating a potential bottleneck in the supply chain. While inventories at some storage facilities offer a temporary cushion, Luman warned that some rare earth elements could become tight as market participants adjust to the tighter export regime. “The situation is dynamic and highly dependent on ongoing talks with China,” he said in an email.
What to watch next
Key questions for the weeks ahead include whether Beijing will nuance or expand the list of restricted materials, how quickly alternative supply chains can be developed, and whether European authorities will secure exemptions or add new strategic reserves. The automotive sector, already grappling with the transition to electrification and ongoing semiconductors volatility, now faces an added layer of geopolitical risk that could slow investment timelines and increase the cost of production for electric vehicles and high-tech components.
Industry resilience and policy responses
Industry groups advocate for a coordinated approach: diversified sourcing, increased recycling, and investment in domestic and allied supply networks to reduce exposure to single-country shocks. At the same time, governments may push for accelerated trade talks, strategic stockpiling, and policy measures to cushion the impact on new-energy vehicle rollouts and broader automotive innovation.
As discussions with China continue, the automotive sector remains focused on maintaining visibility into supply chains, ensuring production stability, and safeguarding the momentum behind electrification and advanced propulsion technology.
