China's Rare-Earth Magnet Restrictions Threaten Auto Production, Could Result In 'Shutdown Of Assembly Lines:' Report

Global automakers are expressing serious concerns over a potential shortage of rare-earth magnets from China, which could result in factory closures within weeks.

What Happened: A letter dated May 9 from the Alliance for Automotive Innovation, representing major automakers like General Motors Co. GM, Toyota Motor Corp. TM, and Volkswagen AG VWAGY, was sent to the Trump administration highlighting these urgent issues, according to a report by Reuters.

“Without reliable access to these elements and magnets, automotive suppliers will be unable to produce critical automotive components, including automatic transmissions, throttle bodies, alternators, various motors, sensors, seat belts, speakers, lights, motors, power steering, and cameras,” the Alliance for Automotive Innovation said.

This could lead to decreased production volumes or even the shutdown of vehicle assembly lines in the U.S., the group added. “In severe cases, this could include the need for reduced production volumes or even a shutdown of vehicle assembly lines.”

China, which controls over 90% of the global processing capacity for these magnets, imposed restrictions in April, requiring exporters to obtain licenses.

Why It Matters: Earlier in April, China imposed export restrictions on seven rare earth elements, including samarium and dysprosium, as a retaliatory measure against U.S. tariffs.

Meanwhile, the European Union is taking steps to reduce its dependency on China for rare earth imports by fast-tracking mining and recycling initiatives.

The U.S. has escalated its tech war with China by imposing new export restrictions on semiconductor design software and other critical materials.

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