Auto industry raises the alarm as China tightens rare earth curbs
Workers assemble Volkswagen’s ID.3 GTX FIRE+ICE electric car on the production line at the Volkswagen electric car factory in Zwickau, Germany, on October 13, 2025.
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Automotive industry groups have raised alarm over the consequences of China’s latest move to restrict critical rare earth exports, saying the measures could lead to supply chain chaos.
China’s Ministry of Commerce last week announced Restrictions on the export of rare earth elements and related technologies have been expanded to prevent “misuse” of minerals in the military and other sensitive sectors.
Beijing has since defended the policy and said the United States was “not afraid” of a trade war after President Donald Trump threatened to impose 100% tariffs on Chinese imports.
Despite a deal reached in July to speed up shipments to the region, Europe’s automotive industry is facing serious disruption after China imposed restrictions on rare earth exports in early April.
The German Automotive Industry Association (VDA), the country’s main auto industry lobby, said China’s new regulations were expected to “have far-reaching consequences on the delivery and onward transport of affected products to Germany and Europe.”
China’s latest export restrictions will hit the battery and semiconductor industries “particularly hard, and thus the automotive industry,” a VDA spokesperson told CNBC via email on Tuesday.
The German auto industry lobby has called on policymakers in both Brussels and Berlin to take up the issue “strongly” with China to quickly find a workable solution.
“The fact is that export restrictions on rare earths and permanent magnets, which China introduced in April this year, have already significantly worsened the supply situation for rare earths and strategic materials. The new measures now go even further,” the VDA spokesman said. he said.
Neodymium was sold on Wednesday, May 5, 2010, at the Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. in Baotou, Inner Mongolia, China. It was exhibited in the factory.
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Rare earth metals are vital components for a variety of high-tech applications, including electronics and renewable energy applications, as well as the production of electric vehicles.
Demand for rare earths and critical minerals expected to increase grow exponentially As the transition to clean energy accelerates in the coming years.
China is the undisputed leader of the critical mineral supply chain. accounting Approximately 60% of the world’s production of rare earth minerals and materials. US officials have previously warned this poses a strategic challenge amid a shift towards more sustainable energy sources.
Depleted reserves
Roberto Vavassori, president of ANFIA, the Italian auto parts manufacturer lobby. reportedly While producers have been able to maintain production as China restricts supplies over the summer, rare earth metal reserves are now at risk of running out, it said on Tuesday.
At a conference in Milan, Vavassori said that this buffer “is no longer there”: According to Reuters. ANFIA did not respond to CNBC’s request for comment.
Rico Luman, senior sector economist for transport and logistics at Dutch bank ING, said China’s new push for exports is pressing from a supply chain perspective.
“China dominates 90% of global refining capacity and is therefore a real bottleneck,” Luman told CNBC via email.
“There are still stocks across the supply chain, as is the case at Tradium’s main storage facility near Frankfurt, so I don’t expect a major decline just yet,” Luman said.
“But rare earths contain a range of elements, some of which may be in short supply. And the easing of supply going forward will largely depend on talks between China,” he added.
