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Monday, June 09, 2025

By Kamal Swami

Magnet Crisis: EU, US Carmakers at Risk from Shortage

Automakers across Europe and the U.S. are facing a new supply chain threat of rare-earth magnets due to strict restrictions imposed by China. Rare-earth magnets is an important component used in vehicles manufactured today. The restrictions from China have created panic across the auto industry, with some suppliers warning that decline in the supply of magnet can effect the production. 
 
 
Frank Eckard, CEO of German magnet manufacturer Magnosphere, said he’s been overwhelmed by urgent calls. “The whole car industry is in full panic,” Eckard said. “They are willing to pay any price.” Rare-earth magnets are essential in electric motors and car components like side mirrors, speakers, and braking sensors. At present China holds 70% of global rare-earth mining and 90% of magnet production, making alternative sources hard to find.
 
The current crisis follows recent global supply chain disruptions, including the COVID-19 pandemic and the semiconductor shortage, which deeply affected automotive output between 2020 and 2023. While automakers had vowed to diversify supply chains, Eckard believes “nobody has learned from the past.” According to CLEPA, one of the automakers, some European parts suppliers have already shut down their operations, while others are on the way to follow the same trend. In the words of  CLEPA Secretary-General Benjamin Krieger, “Sooner or later, this will confront everyone,”. 
 
It is reported that the U.S. and China are going to meet in London this week to discuss the issue. This will be followed  by the U.S. President Trump’s may announcement that Chinese President Xi Jinping agreed to resume rare-earth exports to the U.S. However, in between, automakers like General Motors, BMW, and suppliers including ZF and BorgWarner are developing vehicles with minimal rare-earth usage. Startups such as Niron and Warwick Acoustics are also innovating rare-earth-free technologies. The EU is pursuing domestic alternatives through initiatives like the Critical Raw Materials Act. Still, China’s dominance—controlling over 50% of the global supply of 19 key raw materials—leaves automakers vulnerable.
 
“This is just a warning shot,” said Andy Leyland of SC Insights. “Automakers must act now, or face another massive disruption.”

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