A few days ago, Maruti Suzuki announced it would scale back its electric vehicle (EV) production plans. The cut had nothing to do with demand or manufacturing capability. The issue was a shortage of rare earth magnets used in EV motors.
Another auto major, Bajaj Auto, has raised similar concerns. The company has confirmed that it may have to delay the launch of electric two-wheelers due to the constrained availability of rare earth components from China.
Rare earth elements (REEs) play a crucial role in electric vehicles (EVs) primarily by forming the basis of high-performance permanent magnets—notably neodymium-iron-boron (NdFeB) and samarium-cobalt (SmCo) magnets—that power EV motors. These magnets enable compact, efficient, and high-torque motors essential for EV propulsion. Due to supply risks and cost, research is ongoing into reducing heavy rare-earth content and developing rare-earth-free alternatives, but currently, REEs remain critical to EV motor technology and thus to the sustainability and competitiveness of EVs worldwide.
The recurring theme across both announcements is clear: India’s auto supply chain, particularly for EVs, is vulnerable. As manufacturers accelerate their shift to clean mobility, disruptions in the supply of key materials threaten to undercut progress.
India holds the world’s fifth-largest reserves of rare earth elements (REEs). However, it contributes less than 1% to global production. One reason is the limited refining infrastructure. Most rare earth ores, even when mined, cannot be processed domestically at scale. Instead, India remains heavily dependent on China, which accounts for more than 85% of global REE refining.
This dependence leaves manufacturers exposed. EVs, which use double the quantity of rare earths per vehicle when compared with internal combustion engines, are particularly at risk.
So, the big question that the country has to answer is how to solve this problem, and that too urgently. While the debate on the possible solutions often centres on mining and refining, an equally important source of rare earths remains underutilised—e-waste.
India generated 1.75 million metric tonnes of e-waste in 2023–24, up 72% from five years ago. Yet, only 43% of this waste is processed through formal channels. The rest—nearly a million tonnes—is handled by the informal sector or goes uncollected.
Globally, the gap is even wider. According to recent estimates, only 22.3% of e-waste was formally recycled in 2022, while the remaining 77.7% was either dumped, landfilled, or unaccounted for. This results in the annual loss of valuable resources, worth an estimated $62 billion.
In other words, materials that could reduce India’s import dependency are being discarded, often without recovery or reuse.
Currently, most automakers view recycling as a compliance obligation under Extended Producer Responsibility (EPR) regulations. That approach is no longer sufficient.
Industry experts suggest that the original equipment manufacturers (OEMs) need to adopt a closed-loop strategy, i.e., designing products in a way that enables easy disassembly, recovery, and reuse of critical components.
This means involving recycling partners much earlier in the product lifecycle. Instead of simply outsourcing end-of-life recovery, manufacturers could collaborate with recyclers during R&D and production stages. Such partnerships could improve traceability of materials, boost recovery rates, and support India’s domestic supply chain development. Global partnerships can also help solve a lot of technical issues and technology gaps, and play a significant role in ‘design for recyclability’.
A recycling-led approach offers multiple payoffs for automakers. First, recovering rare earths locally reduces exposure to external supply shocks. Second, domestic sourcing buffers price volatility caused by global disruptions. Third, higher recycling rates strengthen environmental credentials and regulatory alignment. Fourth, investing early in closed-loop systems may yield operational and financial advantages over time. Lastly, it means a cleaner, safer environment and long-term sustainability.
The current supply shocks faced by OEMs may be early indicators of a longer-term trend. As global demand for rare earths is expected to rise 300–500% by 2030, the pressure on sourcing strategies will only grow.
For Indian OEMs, the solution may not lie in simply finding new suppliers but in reducing the need for them. Recycling is no longer just a sustainability conversation; it is a strategic imperative. Manufacturers that act now by investing in recovery, redesign, and circular systems will be better placed to weather future disruptions. Domestic self-sufficient solutions are especially needed now that Chinese export restrictions are biting and supply chains face immediate risks.
In an industry defined by high stakes and thin margins, such foresight could be the difference between resilience and risk.
