China’s announcement of new restrictions on rare earth exports sent alarm bells ringing throughout the global auto industry. On April 4, the country stopped the exports of heavy rare earth elements. This troubling decision has created a seismic production break. China also controls roughly 70% of the world’s rare earth mines and close to 90% of the processing. This dominance is coming home to roost and increasingly, it’s hurting automakers in every corner of the globe.
Rare earths are a group of 17 key elements. They are vital to making cutting edge applications from fighter jets to submarines to smartphones—and they’re just as essential to power a toaster. Their role grows even more critical with the explosive expansion of the electric vehicle (EV) market. These supply chains are critical to the manufacturing of those components that matter most including batteries and electric motors.
The recent export ban has already forced several European automakers, including Ford, to shut down factories due to shortages of these indispensable materials. Ford in particular was forced to halt production of its very popular Explorer SUV as a direct result of this crisis. As the company’s decision illustrates, we are quickly becoming dependent on rare earths and their disruption to our supply chain can be disastrous.
As we explained, none of this should be surprising, as experts have warned that China’s tightening stranglehold on critical minerals has been a trend since at least 2023. Gracelin Baskaran, another industry analyst, noted just how crucial rare earths are to the manufacturing of automobiles.
“Rare earths are really critical, and not just for electric vehicles,” – Gracelin Baskaran.
Baskaran went on to explain how essential these elements have become to safety, infotainment, and driver-assist features in vehicles.
“They are in your seat belt, your steering wheels, various parts of your electrical components. You are not going to manufacture a car without rare earths.” – Gracelin Baskaran.
As the crisis continues to develop, it leaves unanswered questions about the future of the auto industry and its heavy dependence on Chinese resources. Equally prescient, though, was fellow industry expert Dan Hearsch who noted the “crazy, weird” nature of the current scenario.
“But tomorrow it can and will be something else that maybe we’re not thinking about, that maybe isn’t even all that valuable and suddenly will be.” – Dan Hearsch.
To meet these new obstacles, automakers are beginning to look beyond the short-term fixes. You can decrease your reliance on China by processing today’s used materials. Plus, make one-time settlement payments to create new supply and fund research into more transformational technologies.
Combatting these issues had become a priority, and the Trump administration made strides to address them. They rushed shipments of rare earths and magnets to the United States. China’s stranglehold on this critical commodity is increasing. In doing so, automakers will be under more pressure than ever to not just react, but be proactive and adapt to this new frontier of challenges.