Rare earth magnet crisis: Jolt to e Vitara, EV market stares at slowdown

Shortage of rare earth magnets has impacted the production plan of the Maruti Suzuki e Vitara.

With the rare earth magnet crisis hitting the production plan of the e Vitara, Maruti Suzuki India's maiden electric vehicle (EV), the country's nascent electric car space may experience a temporary slowdown, according to sector experts.

Maruti Suzuki e Vitara production impacted

Maruti will start sales of the e Vitara in India before the end of September. While the company plans to produce 67,000 units of the electric SUV by March 2026, the production target for the first half (April-September) of the current fiscal has been hit by the short supply of rare earth magnets, owing to export curbs imposed by China, a source told Moneycontrol.

The country's largest carmaker had initially planned to produce 26,000-27,000 units of the e Vitara during the first half of FY26.

Maruti Chairman R C Bhargava said during the company's post-Q4 FY25 results press conference that a major portion of the electric SUV's capacity was for export markets. To be manufactured at the carmaker's Gujarat plant, the e Vitara will be shipped to over 100 countries, including Japan and European nations.

An industry executive told Moneycontrol that if there is a shortage in the supply of rare earth magnets, the impact will be felt by all the original equipment manufacturers (OEMs). "In case the problem persists for a long duration, the progress made in the electric car segment might be derailed," he added.

The electric passenger vehicle (PV) segment is still in a budding stage in India. At present, it makes up less than 3% of the total car sales in the country.

Amid limited vehicle options and inadequate charging infrastructure, the volumes in the electric car space have witnessed slow growth. From 4,775 units in CY20, the electric car sales in the country increased to 14,670 units in CY21, 47,640 units in CY22, 90,632 units in CY23 and 1,06,966 units in CY24. In CY25 (January-May), 69,373 units of electric cars have been sold.

Electric car sales in India since calendar year (CY) 2020

What are rare earth magnets?

Rare earth magnets are powerful permanent magnets made from rare earth elements such as Neodymium (Nd), Praseodymium (Pr), Dysprosium (Dy) and Terbium (Tb). The most commonly used types are Neodymium-Iron-Boron (NdFeB) magnets, known for their high performance, and Samarium-Cobalt (SmCo) magnets, which are preferred for high-temperature applications.

Uses of rare earth magnets

In the automotive sector, especially EVs, these magnets are integral to the functioning of traction motors like permanent magnet synchronous motors (PMSMs). They are also employed in systems such as electric power steering (EPS), regenerative braking, electronic sensors, audio components and heating, ventilation and air conditioning (HVAC) units.

On average, an electric car uses almost 2 kilograms of rare earth magnets.

Primus Partners Vice President Nikhil Dhaka told Moneycontrol that in the short term, India's EV industry is staring at potential production disruptions due to its heavy reliance on Chinese rare earth magnets and limited supply chain buffers. "With China accounting for 92% of global refined magnet output, any continued export restriction is likely to escalate input costs and create serious supply bottlenecks," he said, adding that OEMs have flagged the risk of output being hit as early as July 2025 if shipments do not resume.

"In the long term, this exposes a deeper strategic vulnerability in India's EV roadmap. Without domestic magnet manufacturing capacity, the risk to production targets and export competitiveness will only grow. What is urgently needed is a mix of supply chain diversification, focused R&D into alternatives and accelerated efforts to build an indigenous rare earth magnet ecosystem," Dhaka noted.