Electric two-wheeler maker Ather Energy has flagged a short-term disruption in vehicle supply to dealerships due to the shortage of rare earth magnets from China. The company foresees an impact of up to a seven-day supply to dealers during the July–September quarter of this financial year.
“In the short term, which is this quarter, there could be an impact of about a week odd in terms of potential business impact…The right way to see this would be not like a production stoppage for seven days, but a possible gap in our ability to supply our dealers’ demand for up to about a week in this quarter,” CEO Tarun Mehta said on Monday.
He noted that the company is attempting to minimize retail disruption using channel inventory, though retail may still be partially affected due to limited stock buffers. “At this point, this will have some impact on retail. I would be amiss if I said this will have no impact on retail because our channel stocks are not that high. But there is channel stock and that is the advantage of having a channel.
Rare-earth magnets play a critical role in the automotive industry. These magnets are important, particularly for EVs, due to their higher performance in small form factors, enhanced energy efficiency and critical functionality in both powertrains and digital systems.
China produces 60% of the world’s rare earth elements and controls around 90% of the global refining capacity. China’s suspension of magnet supplies since April has put automakers on high alert, as they scramble to secure supplies and keep production running.
This supply chain choke has accelerated efforts by companies to find long-term solutions. Many are now developing magnet-free motor technologies and adopting more readily available ferrite-based magnets to reduce their dependency on a volatile supply.
To address the supply crunch, Mehta noted that Ather is exploring a range of alternatives, including transitioning to light rare earth magnets, which are still available in the global market, or even switching to ferrite-based motor technologies. The company is also considering partial motor assembly in China to bypass the export ban.
“I am more optimistic about moving to rare earth magnets out from heavy rare earth magnets because rare earth magnets don’t have an export ban and have a little bit of more supply available globally, with China not being the only one,” he said.
Recently, Ola Electric said the supply of rare earth elements poses a major long-term risk for auto OEMs, and the company plans to introduce rare earth-free motors in its two-wheeler from the October-December quarter of this financial year. TVS Motor has also said that they are working on
The rare earth magnet issue comes at a time when Ather Energy is looking to scale up production ahead of the upcoming festive season and double its retail footprint across India. Mehta added that the magnet supply disruption is expected to be contained within the July-September quarter.
Having been slow to introduce new variants or products and grow its retail presence, Ather Energy has now shifted gears, aggressively expanding its store network. The automaker is targeting to more than double its retail footprint to over 750 stores by year-end.
The introduction of Ritza last year has also widened the company’s addressable market. Ather Energy recently launched a new variant of Ritza with extended range and performance at an accessible price point. In June, Ather Energy recorded the largest growth rate in registrations as well as market share improvement. It registered 16,231 units while its market share rose to 15.8% compared to 9.5% in the year-ago period.