By Christina Amann, Nick Carey and Kalea Hall
Berlin/London/Detroit (Reuters) -Frank Eckard, CEO of a German magnetic maker, has requested a stream of calls in recent weeks. Exceptional car manufacturers and parts suppliers have been desperate to find alternative sources of magnets that are scarce because of the Chinese export cord edges.
Some told Eckard that their factories could be without backup magnet supplies in mid-July. “The entire car industry is in full panic,” says Eckard, CEO of Magosphere, located in Troisdorf, Germany. “They are willing to pay every price.”
Auto managers are again driven into their war rooms, caused that the tight export controls of China on rare earth-magnets crucial to make cars could paralyze the production. US President Donald Trump said on Friday that Chinese President Xi Jinping agreed to make rare earth's minerals and magnets flow to the United States. An American trade team is planned to meet Chinese counterparts on Monday for conversations in London.
The industry is concerned that the situation with rare earth can flow in the third massive Supply Chain shock in five years. A shortage of semiconductors has wiped millions of cars from the production plans of car manufacturers, from around 2021 to 2023. Before that, the Coronavirus Pandemie closed for weeks for weeks.
Those crises led the industry to strengthen supply chain strategies. Managers have given priority to backup supplies for important components and investigated the use of just-in-time inventories that save money but they can leave without stocks when a crisis unfolds.
Based on the incoming calls of Eckard, however: “No one has learned from the past,” he said.
This time, while the bottleneck with rare earth is shifting, the industry has few good options, given the extent to which China dominates the market. The fate of the assembly lines of car manufacturers has been left to a small team of Chinese bureaucrats because it assesses hundreds of applications for export permits.
Various European car supply factories have already been closed, with more malfunctions, said the car supplier Association of the region, Clepa.
“Sooner or later this will confront everyone,” said Clepa-Secretary-General Benjamin Krieger.
Nowadays, cars use rare earths-based engines in dozens of component side mirrors, stereo speakers, oil pumps, wipers and sensors for fuel leakage and brake sensors.
China controls up to 70% of the global mining with rare earth, 85% of refining capacity and approximately 90% of the metal alloy of rare earth and magnet production, Consultancy AlixPartners said. The average electric vehicle uses approximately 0.5 kg (slightly more than 1 pound) of rare earthly elements, and a fossil fuel car uses only half that, according to the International Energy Agency.
China was previously clamped, including a dispute in 2010 with Japan, in which it worked out the export of rare earth. Japan had to find alternative suppliers and in 2018 China accounted for only 58% of the rare earthy input. “China has had a map with rare earth to play whenever they wanted,” said Mark Smith, CEO of Mijnbouwbedrijf Niocorp, which is developing a project with rare-earth in Nebraska that is planned to start production within three years. In the entire industry, car manufacturers have tried to weat China for rare earth magnets, or even develop magnets that do not need those elements. But most efforts are years away from the required scale.
“It is really about identifying … and finding alternative solutions” outside of China, said Joseph Palmieri, head of Supply Chain Management at supplier APTIV, at a conference in Detroit last week.
Automakers, including General Motors and BMW and large suppliers such as ZF and Borgwarner, work on engines with a low to zero rare Earth content, but few have succeeded in sufficiently scaling production to save costs.
The EU has launched initiatives, including the Critical Radems Act to increase European sources with rare earth. But it didn't move fast enough, said Noah Barkin, a senior advisor at Rhodium Group, an American think tank -oriented American think tank.
Even players who have developed salable products have difficulty competing with Chinese producers on price.
David Bender, co-head of the German metal specialist Haaeus' magnet recycling company, said it only works at 1% capacity and will have to close next year if the sale does not rise.
Niron, based in Minneapolis, has developed the free magnets of rare earth and has collected more than $ 250 million from investors, including GM, Stellantis and car supplier Magna.
“We have seen a step -by -step change in interest of investors and customers,” because China's export checks came into force, said CEO Jonathan Rowntree. It plans to plan a $ 1 billion factory that is planned to start production in 2029.
Warwick Acoustics, based in England, is expected to develop rare-earth speakers in a luxury car later this year. CEO Mike Grant said that the company is in conversation with another dozen car manufacturers, although the speakers are not expected to be available in regular models for about five years.
As car companies explore solutions in the longer term, they are left to prevent imminent factory closures.
Automakers must find out which of their suppliers – and smaller a few links from the supply chain – require export permits. Mercedes-Benz, for example, talks to suppliers about building rare-earth-stocks.
Analysts said that the restrictions could force car manufacturers to make cars without certain parts and park them until they become available, as GM and others did during the semiconductor crisis.
The dependence on China car manufacturers does not end with rare earth elements. A report from the European Commission from 2024 said that China controls more than 50% of the worldwide supply of 19 important raw materials, including manganese, graphite and aluminum.
Andy Leyland, co-founder of Supply Chain Specialist SC Insights, said that one of those elements could be used by China as a lever. “This is just a warning shot,” he said.
(Reporting by Christina Amann and Victoria Waldersee in Berlin, Kalea Hall in Detroit and Nick Carey in London; Additional reporting by Isabelle Carlsson and Milan Strahm in Brussels in Brussels, Guilio Piovaccari in Milan and Norihiko Shirouzu in Austin; Editing BY))
