Can EV Makers End Reliance on China’s Rare Mineral Supplies?

Trade restrictions and regulatory shifts are reshaping how original equipment manufacturers (OEMs) source critical materials for EVs.

Rare earth elements (REEs), essential for modern vehicle components, are at the centre of a growing geopolitical struggle, one that threatens the stability of EV production worldwide.

At present, China dominates both the mining and processing of REEs, accounting for 60% of total production and 90% of global processing capacity.

This dominance gives it a unique grip on a supply chain crucial to the electric vehicle sector.

In response, countries and automakers are now rethinking how they secure materials like neodymium, dysprosium, lithium and terbium, metals vital to EV traction motors and other magnetic components.

New licensing rules raise risks for EV supply chains

Tensions between China and the United States have escalated over trade policies, prompting regulatory retaliation.

In what was presented as a sustainability-driven reform, China has introduced a new licensing system for REE exports.

Exporters must now obtain specific licences to ship materials abroad, significantly complicating the process for international buyers.

The move followed US President Donald Trump's tariff increases and directly affects American manufacturers.

However, the implications are global.

While China's intent is officially to "encourage enforcement of rules and regulations," the result has been further disruption for sectors already vulnerable to supply constraints, chief among them, EV's.

A new study from S&P Global Mobility highlights the impact of these restrictions on vehicle manufacturing.

The automotive industry relies heavily on magnets containing rare earth elements, particularly for use in electric motors.

Battery electric vehicles (BEVs) and hybrid vehicles use materials like neodymium, dysprosium and terbium to manage motor temperature and performance. With these under export control, carmakers are under pressure to secure alternatives.

Seven REEs are currently under tight scrutiny, including dysprosium and terbium, which are critical to magnet performance in automotive systems.

Ford, among others, has felt the effect directly, shutting down a production line temporarily in June due to shortages.

Temporary relief but long-term concerns

Diplomatic engagement between the US and China resulted in a six-month simplification of the export process, giving American automakers temporary relief.

By July, China began granting export licences for REEs to be used in the automotive sector, easing short-term disruption.

Yet the event underscored the fragility of a system reliant on a single supplier.

From speakers to powertrains, many vehicle components would be inoperable without access to REEs.

This dependency poses a particular risk as electric vehicle adoption increases globally and demand for these materials rises accordingly.

The risks are not confined to manufacturers.

Without secure supply, the EV sector could face production delays, price hikes and stagnating innovation.

The situation exposes how tightly EV development is bound to global resource politics.

Chris Wright, Secretary of Energy, has framed the issue within a broader energy policy context: “Thanks to President Trump’s leadership, America is returning to free and open dialogue around climate and energy policy... policies that expand access to affordable, reliable, secure energy and improve quality of life for all Americans.”

Shifting technologies and sourcing strategies

In response to these pressures, OEMs and governments are now prioritising rare earth diversification.

North America and India are working to build out domestic extraction and processing capacity, but this remains a long-term effort.

Creating a stable, regional supply will require years of investment and infrastructure development.

Meanwhile, some manufacturers are turning away from rare earth magnets altogether.

Europe is exploring the use of externally excited synchronous motors (EESMs), an alternative motor type that uses copper windings instead of permanent magnets.

Renault and BMW are already deploying this technology, and adoption is projected to grow.

By 2035, it is expected that 41% of all European vehicle motors will be EESMs.

These motors remove the need for key rare earth elements, reducing exposure to international supply constraints.

While they require different design and power management strategies, they are seen as a viable path to long-term sustainability in EV motor production.

Investment in REE alternatives continues across multiple regions, including within Europe, where projects now focus on both raw material extraction and innovation in component design.

Although China has resumed exporting REEs, the episode has made clear that the EV industry’s reliance on a single supplier is unsustainable.

As global demand grows and tensions persist, manufacturers are accelerating efforts to secure new technologies and diversify sourcing.