The Chinese flag is seen in this illustration taken May 30, 2022.
Many Western automakers, despite past lessons, have continued to rely heavily on these materials. The restrictions have disrupted production, with some companies halting assembly lines due to shortages of metals like dysprosium, essential for neodymium-iron-boron (NdFeB) magnets. These magnets are vital for electric vehicles (EVs) and other automotive systems.
In 2010, Beijing stated that its export quotas aimed to address illegal domestic mining: “The measures were necessary to regulate the industry,” a Chinese official noted at the time. However, the timing coincided with a maritime incident involving a Chinese trawler and a Japanese coast-guard vessel in contested waters. The quotas caused rare earth prices to surge, with dysprosium oxide increasing 26-fold from 2009 to 2012, per Adamas Intelligence. The restrictions eased after a 2014 World Trade Organization ruling.
Some automakers adapted. In 2012, Nissan Motor Co. introduced a LEAF EV model using 40% less dysprosium: “We prioritized resilience in our supply chain,” a Nissan spokesperson said. Renault developed a rare-earth-free motor for its ZOE model, reducing dependency. By 2017, 12% of global EV sales used such motors, though this share later declined as rare earth prices stabilized and EV demand grew.
Today, about 97% of EVs rely on rare-earth-powered motors, driven by market growth and the increasing use of magnets in vehicles for functions like braking and entertainment systems. China produces roughly 95% of global NdFeB magnets and dominates their supply chains.
Trade discussions between Chinese and U.S. officials, ongoing as of Tuesday, aim to address these restrictions alongside U.S. limits on advanced semiconductors. While a resolution may ease immediate pressures, long-term solutions remain complex. Western efforts to develop independent supply chains are underway, but building them could take years. For instance, the U.S. Department of Defense is investing heavily to meet defense needs by 2027, prioritizing military applications over civilian ones.
Reducing reliance on rare earths offers another path. Companies like Renault and BMW have explored alternative motor designs: “Innovation in motor technology is key to stability,” a BMW engineer commented. Other automakers are researching similar solutions, though most are not yet market-ready. Adjusting vehicle designs to use fewer rare earths in non-essential systems could also help.
These export limits underscore the need for diversified supply chains and innovative technologies to ensure stability in global automotive production.
