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A tightening chokehold by China on rare-earth magnet exports is forcing global automakers to consider unprecedented steps - including shifting parts of production to Chinese factories - to avoid shutting down electric vehicle assembly lines within weeks.
Four of the world’s top carmakers are urgently exploring ways to bypass China’s tightening grip on rare-earth magnet exports, critical to electric motors and other vehicle components. Among the most drastic ideas: relocating some production to Chinese factories or sending U.S.-made motors to China for magnet installation.
These workarounds could help automakers avoid shutdowns, as China’s export controls cover raw magnets - but not finished products. “If you want to export a magnet, they won’t let you,” said one supply-chain executive. “But if it’s in a motor, you can.”
In April, China began requiring licenses to export magnets made with key rare-earths like dysprosium and terbium. China controls about 90% of global supply and dominates the refining and separation process. The magnets are essential not just for EV motors but also for standard components like headlights and wipers.
Ford recently paused production of the Explorer in Chicago due to magnet shortages. Other automakers may soon face similar disruptions. A joint letter from major auto industry groups warned that domestic and alternative sources for rare-earths won’t meet near-term demand.
Shipping motors abroad just to install a chiclet-sized magnet adds cost and time - but carmakers say it may be the only way to avoid halting production. They’re also scouting for non-Chinese suppliers in Europe and Asia, though no source can yet match China’s scale.
Another option is reverting to older electric-motor technology that doesn’t rely on rare-earth magnets. But those systems are less efficient, and making more gas-powered cars would risk violating U.S. fuel-economy rules. Automakers also can’t rely on emissions credits from EV makers like Tesla, as those are sold out through 2027.
“Some licenses have been granted,” said Hildegard Müller, president of Germany’s auto lobby, “but it’s not enough. If the situation doesn’t change quickly, production stoppages are possible.”
The crisis highlights just how deeply dependent the global auto industry has become on China for a material that powers the future of transportation.
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