Ola Electric, Tata Motors, Bajaj Auto rally up to 6% as China assures addressing rare earth magnet crunch

The Nifty Auto index is up 11.21 percent since the beginning of the year.

Indian auto shares extended gains on Tuesday, with Ola Electric, Bajaj Auto, Hero MotoCorp, Hyundai Motor, Eicher Motors and Maruti Suzuki rising up to 6 percent in trade. The Nifty Auto index advanced 1 percent, buiglding on Monday’s near 5 percent jump after reports that the government may cut GST on vehicles to spur demand.

The rally also found support from fresh signals out of New Delhi. According to CNBC TV-18, China’s foreign minister, currently in India for meetings, has assured that Beijing will address key concerns flagged by New Delhi, including the supply of rare earth magnets — a critical input for automakers — and tunnel boring machines.

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For auto manufacturers, the rare earth issue has been particularly acute. China accounts for about 90 percent of global production and supply, and shortages have already disrupted output. Bajaj Auto slashed production of its electric two-wheelers by as much as 50 percent in July, warning that volumes in August and September will also remain constrained.

Hero MotoCorp, on its Q1FY26 earnings call, admitted the shortage is an industry-wide challenge but said it has secured enough supplies to cover both its internal combustion engine and electric vehicle models through the second quarter of FY26. The company added that key components such as EV motors and engine and wheel sensors, which rely heavily on rare earth magnets, are covered for now, while it continues to explore long-term alternatives.

Tata Motors, India’s largest EV player, has also flagged rare earth magnets as a potential choke point. While its production has not been hit yet, the company is already working on alternative supply options to secure future operations.

If Beijing’s assurances materialise, automakers could find much-needed relief from supply disruptions that have threatened production schedules, even as domestic demand prospects brighten with talk of a potential GST cut.

At about 10:55 am, the Nifty Auto index was up 1 percent, with the top gainers being Ola Electric, Bajaj Auto, Tata Motors, Maruti Suzuki, Hero MotoCorp, Eicher Motors, Hyundai Motor India, and TVS Motor Company. The Nifty Auto index is up 11.21 percent since the beginning of the year.

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