Beijing: China’s recent decision to tighten export controls on a group of rare earth elements has triggered alarm across global industries, especially the rapidly expanding electric vehicle (EV) sector. The move, widely interpreted as part of President Xi Jinping’s broader strategy to assert economic leverage, highlights the vulnerabilities of countries and corporations heavily reliant on Chinese mineral resources.

Rare earth elements (REEs) like dysprosium, terbium, and neodymium are vital for the production of high-efficiency electric motors, wind turbines, smartphones, and military equipment. Although not rare in occurrence, these minerals are difficult and environmentally costly to extract and refine — a process China has long dominated.

China currently supplies over 60% of the global REE output and controls about 90% of processing capacity. This overwhelming monopoly has given Beijing significant strategic power, especially as the global transition to electric mobility accelerates.

In late May, China introduced a new export regime that requires special licenses for companies seeking to ship seven key rare earth elements out of the country. Beijing cited “national security” as the rationale for the move, a phrase that has increasingly appeared in recent Chinese trade restrictions — from semiconductors to graphite.

Industry insiders say the approval process for these licenses is opaque and highly bureaucratic, adding weeks or even months to delivery timelines. As a result, even companies whose export applications have been endorsed by Chinese embassies — including nine Indian automotive suppliers — are still waiting for final green lights from the Ministry of Commerce.

The delay has placed Indian EV component manufacturers in a bind, as they struggle to source rare earth magnets critical for their motors and gear systems. With India aiming to significantly ramp up its domestic EV production under the FAME III policy, these disruptions could derail timelines and escalate costs.

In Europe, the impact has been even more severe. According to the European Association of Automotive Suppliers (CLEPA), several plants have already suspended operations due to lack of critical materials. Countries such as Germany and France, whose automakers are major players in the global EV race, are scrambling to secure alternative supplies.

The export curbs have reenergized calls for supply chain diversification. The United States, the European Union, India, and Japan are actively seeking partnerships to develop rare earth processing capabilities outside of China — notably in Australia, Canada, and parts of Africa.

Companies are also investing in REE recycling technology and exploring ways to engineer EV motors that use fewer or no rare earths. Tesla has already announced its next-generation EV powertrains will eliminate the use of rare earth magnets altogether, citing environmental and geopolitical risks.

Tata Motors, one of India’s EV frontrunners, recently claimed to have reduced rare earth use by 30% in its updated Nexon EV, showing how companies are adapting through innovation.

Analysts view this export tightening as part of a broader economic statecraft under President Xi Jinping, in which critical resources are weaponized to gain leverage in trade and diplomatic disputes. The move comes amid ongoing tensions between China and the West — particularly over Taiwan, technology, and supply chain realignments post-COVID.

"China is sending a clear message: If you try to cut us out of your tech supply chains, we can respond where it hurts — in EVs and defense," said a senior geopolitical analyst in New Delhi.

While short-term disruptions are likely to strain EV production and inflate costs, industry experts see a silver lining: the crisis may accelerate the long-overdue shift toward self-reliance and resilience in critical minerals.

Governments are being urged to treat rare earths as strategic assets, akin to oil and semiconductors. Policy frameworks to support domestic mining, incentivize refining technology, and build global alliances are now at the forefront of industrial strategy discussions.

For now, the world watches closely as China flexes its mineral muscle — a reminder that in the 21st century, economic power lies not just in technology, but in the earth beneath our feet.