China has begun easing restrictions on rare earth exports for major U.S. and European automakers, offering limited relief to an industry facing mounting production threats from a critical materials bottleneck. The move comes after emergency trade talks in Paris between Chinese Commerce Minister Wang Wentao and EU Trade Commissioner Maros Sefcovic, and as a delegation of U.S. officials prepares for follow-up negotiations in London.
On Saturday, China's Ministry of Commerce said it would establish a "green channel" to expedite export license applications for eligible European Union firms. Separately, Beijing granted licenses to suppliers of General Motors, Ford, and Stellantis, according to Reuters. Stellantis confirmed it is "working with suppliers and institutions to ensure an efficient licensing process," and said it had managed to avoid "major interruptions" to production so far.
The decision follows widespread industry warnings that Beijing's April restrictions on rare earth exports-imposed in response to tariff hikes by U.S. President Donald Trump-have pushed the auto sector toward a third global supply chain crisis in five years, following the COVID-19 pandemic and the semiconductor shortage.
Jonathan O'Riordan, international trade director at the European Automobile Manufacturers' Association (ACEA), said rare earth export licenses had taken a "significant" amount of time to process, warning of "a very, very critical moment whereby those stocks are now being exhausted." CLEPA, the European Association of Automotive Suppliers, reported that several production lines have already shut down.
"The whole car industry is in full panic," said Frank Eckard, CEO of German magnet manufacturer Magnosphere. "They are willing to pay any price."
China dominates the global supply of rare earths, controlling 60% of production, 85% of refining, and 90% of magnet manufacturing, according to AlixPartners. The critical materials are essential to motors used in internal combustion and electric vehicles, with the average EV using over one pound of rare earth elements.
Mercedes-Benz has begun talks with suppliers about building stockpiles. Other automakers may be forced to assemble vehicles without some components and store them, as they did during the chip shortage. CLEPA Secretary-General Benjamin Krieger warned, "Sooner or later, this will confront everyone."
In a bid to diversify away from China, automakers and suppliers are investing in alternatives. Niron Magnetics, backed by Stellantis, GM, and Magna, has raised $250 million and plans to open a $1 billion rare-earth-free magnet plant by 2029. England's Warwick Acoustics will debut rare-earth-free speakers in a luxury vehicle this year.
Still, most of these solutions are years from scalability. David Bender of Heraeus said its rare earth magnet recycling facility in Germany is operating at just 1% capacity and risks closure next year. "China has had a rare-earth card to play whenever they wanted to," said Mark Smith, CEO of NioCorp, which is developing a rare earth project in Nebraska.
The European Commission estimates China controls more than 50% of the global supply of 19 key raw materials, including graphite, manganese, and aluminum. Andy Leyland, co-founder of SC Insights, warned, "This just is a warning shot."
