Automakers seeking to import fully assembled motors to bypass China’s export restrictions on rare earth magnets have urged the Indian government to reduce import duties and ease local content requirements, a report by The Mint said on Monday.
The Society of Indian Automobile Manufacturers (Siam), the industry’s key lobby group, has warned that passing on the additional cost burden of imported motors will raise vehicle prices and disqualify manufacturers from production-linked incentives due to stringent domestic value addition rules. Production for several models could come to a halt if motors are not made available in time, Siam wrote to the Ministry of Heavy Industries on 27 June. The business daily said that it has reviewed a copy of the letter.
“In the current scenario, when there is a restriction on the import of standalone magnets, full assemblies, allied components, or sub-assemblies will have to be imported, which will attract a basic customs duty (BCD) of 15%, leading to an increase in the cost of vehicles,” the letter stated.
Electric vehicles are powered by traction motors connected to a battery, and rare earth magnets are also essential for sensors, telemetry, and other electronics across all types of vehicles. India’s automakers have not yet managed to meet Chinese authorities to expedite the approval process, highlighting their dependence on foreign supply chains for critical components, the report added.
Siam has also requested that localization norms under the Production-Linked Incentive (PLI) scheme and the PM E-Drive initiative be temporarily relaxed. This would allow automakers to use imported components without forfeiting eligibility for government incentives.
“Applicants under both the PM E-Drive Scheme and Auto PLI Scheme should be granted temporary exemption/relaxation from the compliance requirements under PMP (Phased Manufacturing Programme) timelines and DVA (Domestic Value Addition) thresholds, specifically for components/aggregates affected by the REM supply crisis,” Siam wrote. The letter also urged the heavy industries ministry to request the finance ministry to cap the BCD on imported motors at 7.5%.
Siam’s membership includes major players such as Maruti Suzuki India Ltd, Hyundai Motor India Ltd, Tata Motors Ltd, Bajaj Auto Ltd, Mahindra and Mahindra Ltd, and TVS Motor Co Queries emailed to Siam remained unanswered at the time of publication.
“If China relaxes its restrictions, then we will return to normal; but if it doesn't, there are no quick solutions,” said SB Mohanty, acting chairman and managing director of IREL Ltd, the state-owned rare earths company, told The Mint in an interview.
On 24 June, Heavy Industries Minister H.D. Kumaraswamy said that the government is considering a scheme to subsidize domestic production of rare earth magnets, and stakeholder consultations are currently underway.
Industry experts warn that any cost increase due to the supply crunch is likely to be passed on to consumers, as automakers operate with thin profit margins. Harshvardhan Sharma, Group Head for Auto Tech and Innovation at Nomura Research Institute Consulting & Solutions India, said the difference in duties, combined with logistics and supplier markups, could increase the landed cost of motors by 18–25%. “Any increase in motor prices — due to full motor imports — cascades directly into final vehicle pricing unless offset by subsidies or economies of scale,” Sharma said.
The traction motor — the most critical component in an EV — relies heavily on rare earth magnets. Automakers have held several rounds of consultations with the government in recent months, warning that production lines will be at risk if the issue remains unresolved. Bajaj Auto had already flagged the threat in its post-earnings call on 29 May, cautioning that output could be hit as early as July.
Srihari Mulgund, Partner at EY Parthenon, noted that relying on motor imports would hand over more market control to China.
“China has the capacity to meet India’s demand, and for low-voltage motors used in two-wheelers and three-wheelers, India could emerge as a key player. But with razor-thin margins in this industry, any cost hike is bound to be passed on to buyers, which may impact demand,” he said.
Several automakers, including Maruti Suzuki, Mahindra, Tata Motors, and Hyundai, have already raised prices in 2025 by 1–4%. Experts warn that further price hikes could hurt demand, especially with the festive season around the corner and a market already showing signs of weakness.
“Along with the increase in cost, automakers will face compliance-related expenses as well, since new motors will have to be homologated with regulatory authorities,” Mulgund added.
According to industry estimates, Indian car market is expected to grow by 1–2% in FY26. In 2025, it grew by 2% to reach 4.3 million units.
Two people familiar with the situation told Mint that Chinese suppliers are now asking Indian companies to purchase fully built motors instead of raw rare earth magnets, which would impact local manufacturing efforts.
“If motors begin to be imported from China, it will put our localisation efforts under threat and make firms more dependent on China,” one of the sources said. Increased reliance on China — especially for components critical to clean fuel vehicles — could also hinder India’s Make in India initiative.
Nomura Research Institute estimates that traction motors account for 13–18% of the bill of materials in electric two-wheelers, and 8–10% in passenger EVs, where batteries alone contribute 35–40%.
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