AUTONEWS

Automotive industry in panic and racing against time to avoid industrial blackout

The phones are ringing off the hook in the office of Frank Eckard, CEO of German magnet manufacturer Magnosphere.

On the other end of the line, carmakers and suppliers are desperately searching for alternatives to keep their assembly lines running.

The reason? China has imposed new restrictions on the export of magnets made with rare earths – essential components for the operation of practically all modern vehicles.

According to Eckard, some companies are already admitting that they may be forced to stop their activities by mid-July. “The entire automotive industry is in total panic,” he says.

“They are willing to pay any price.”

The situation is so critical that industry experts are already talking about a third major supply chain collapse in just five years – after the semiconductor crisis between 2021 and 2023, and the closures caused by the pandemic in 2020.

China's new restrictions directly affect a component that seems small but is essential: rare earth magnets.

Found in rear-view mirrors, speakers, brake and fuel sensors, oil pumps and dozens of other systems, these magnets ensure the functioning of electric cars and combustion engines.

The problem? China almost completely dominates this market. According to the consultancy AlixPartners, the Asian country controls 70% of global rare earth extraction, 85% of refining capacity and around 90% of the production of metal alloys and magnets.

In practice, the fate of entire factories in Europe and the United States is in the hands of a small group of Chinese bureaucrats in charge of granting – or not – export permits.

Some European suppliers have already closed, according to the CLEPA association, and further shutdowns are expected in the coming weeks. The shortages affect both combustion and electric vehicles, but EVs are the most affected: they use, on average, twice as much rare earths compared to traditional models. 

Even with initiatives such as the European Union's “Critical Raw Materials Act” and projects by companies such as the American Niron or the British Warwick Acoustics to develop alternative magnets, industrial-scale solutions are still years away. Meanwhile, automakers are returning to crisis mode. Some are considering stockpiling magnets and critical parts. Others are considering assembling incomplete cars and leaving them idle until the components are available – as happened during the chip shortage. 

Dependence is not limited to magnets. A 2024 European Commission report found that China controls more than half of the global supply of 19 strategic raw materials, including graphite, manganese and aluminum. According to supply chain expert Andy Leyland, the current crisis is just a warning sign. “Any of these elements can be used as a political weapon,” he warns.

Amidst this storm, one thing is certain: the lessons of the semiconductor crisis appear not to have been learned, and the global automotive industry may be about to face another turbulent chapter in its already unstable supply chain.

Autonews