As seen earlier this year with China’s recent export restrictions on rare earth elements, such actions can have serious and immediate effects on European automotive production. Since April, the Chinese government has severely restricted access. These measures have wreaked havoc on the supply chain for many extremely important materials commonly used in virtually all high-tech products.
Rare earth elements are critical component materials used in the manufacture of many advanced technologies. They are integral to the supply chains producing the components needed for electric vehicle batteries and other electronic devices. China today produces about 90 percent of these elements. Its extreme export controls have ignited fears among European parts producers who depend on them for their livelihoods.
In fact, the trade association for European automotive component manufacturers has documented a skyrocketing increase in applications for export licenses. These restrictions are fueling the all-time high surge. Since the restrictions went into effect, manufacturers have sent in hundreds of applications. Less than a quarter of these requests have been approved. This low approval rate reveals the challenges faced by companies struggling to secure the necessary materials for their production lines.
The step-by-step speed of the approval process has added to the upheaval making up the storm of supply chain uncertainty. In the middle are manufacturers, who are caught between opposing forces. They have no idea of knowing when they’ll get the materials they need or how many will show up and be usable. This volatility threatens production timetables and long-range planning for manufacturing operations.
As of now, the Chinese government has no plans to lift restrictions any time soon. Needless to say, European auto parts manufacturers need to move rapidly to meet these growing demands. As of 2019, China controlled 71 percent of the global rare earth elements market. This reality highlights weaknesses in global supply chains that rely on these materials.