China’s new rare earth supply restrictions are sending shockwaves through the global auto industry. With Beijing halting exports of key minerals and magnets since April, carmakers in Europe and beyond now face major production hurdles and rising uncertainty.
Auto Plants Begin to Feel the Impact
Some European auto parts plants have already shut down due to material shortages. Mercedes-Benz, though currently unaffected, is holding talks with key suppliers to build “buffers” such as stockpiles to brace for possible disruptions. BMW acknowledged that some parts of its supplier network are hit, but its factories continue to run.
China’s Leverage Over Critical Minerals
China controls nearly 90% of the global rare earth market. These minerals are vital to making electric motors, batteries, and other advanced components. The latest export controls have impacted not only automakers but also aerospace firms, chipmakers, and military contractors worldwide.
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The restrictions appear to be part of Beijing’s broader response to US tariffs, but they apply globally. EU Trade Commissioner Maros Sefcovic has urged clarity from Chinese officials. Meanwhile, EU Industrial Strategy Commissioner Stephane Sejourne stressed the need to reduce dependence on China and accelerate diversification efforts.
Industry Leaders Sound the Alarm
Ford’s CFO Sherry House admitted the export curbs are adding pressure to an already fragile system. She said supply chains, which rely on precise scheduling, are now dealing with extra bureaucracy and delays. While some license applications are processed smoothly, others face holdups.
Europe’s auto supplier group CLEPA revealed that only one in four export license requests have been approved since April. Several production lines have stopped due to shortages, with others at risk.
Fears of a Repeat of the Chip Crisis
ZF Friedrichshafen, a top German supplier, has managed to secure permits so far. However, board member Mathias Miedreich warned that this rare earth crunch could mirror the chip shortage during the pandemic, which cost automakers millions of vehicles.
Carmakers now face a familiar dilemma: race to secure materials or risk stalled production lines.
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