The Ministry of Heavy Industries is actively engaging with companies that have the potential to manufacture rare earth elements domestically, Additional Secretary Hanif Qureshi, IPS, announced at the India EV Conclave on Tuesday, marking a significant push toward self-reliance in critical EV components.
The announcement comes amid an ongoing supply crisis triggered by China’s export restrictions on rare earth permanent magnets, which began in April 2025 and have severely impacted India’s automotive sector, particularly electric vehicle production. Rare earth permanent magnets are critical components in electric vehicle traction motors, power steering systems, sensors, and audio systems. China currently controls approximately 90% of global rare earth magnet production, creating a chokehold on supply chains worldwide.
“The Ministry is talking to companies with potential to manufacture rare earths,” Qureshi stated at the event organized by Autocar Professional at Hyatt Regency Delhi, signaling the government’s determination to address this strategic vulnerability.
The urgency of domestic rare earth production became apparent when China imposed export restrictions in April, causing significant disruption to Indian automotive manufacturers. Major players including Bajaj Auto, Maruti Suzuki, Ather Energy, and TVS Motor have flagged production constraints due to depleting rare earth magnet inventories. Maruti Suzuki recently cut its near-term production targets for the e-Vitara electric SUV by two-thirds due to rare earth shortages. Bajaj Auto warned during its Q4 earnings call that electric scooter production would face disruptions starting July 2025 as magnet stocks depleted.
According to Crisil Ratings, India sourced over 80% of its approximately 540 tonnes of magnet imports from China in the last fiscal year. By May 2025, nearly 30 import requests from Indian companies endorsed by the government were awaiting approval from Chinese authorities, highlighting the precarious nature of supply dependence.
The Ministry of Heavy Industries is finalizing a comprehensive scheme to promote domestic rare earth magnet manufacturing. Reports suggest the initiative, likely called the “Scheme to Promote Sintered Rare Earth Permanent Magnet Manufacturing in India,” could have an outlay of ₹5,000-7,350 crore. The scheme is expected to include approximately 15% capital subsidy on eligible investments made after April 1, 2025, to offset the higher costs of importing plant and machinery from countries other than China. It will also feature provisions to partly fund the difference between domestically produced magnets and Chinese imports to achieve cost parity and encourage local demand.
The scheme aims to establish an annual domestic production capacity through five integrated sintered rare earth permanent magnet manufacturing facilities, operating over seven years with a two-year gestation period for setting up facilities, followed by a gradual ramp-up to achieve production targets.
Several major conglomerates have expressed interest in rare earth magnet manufacturing. Anil Agarwal’s Vedanta Group has indicated interest, with a spokesperson stating that rare earth magnet manufacturing is “strategically important to green technologies” and that these minerals are “fast becoming new levers of global influence.” Sajjan Jindal’s JSW Group is reportedly among those showing keenness for the government initiative. Mahindra & Mahindra, with steady internal demand for rare earth magnets, is open to collaborating with partners or signing long-term supply contracts with local manufacturers. Uno Minda is exploring plans to enter rare earth magnet production, while Sona Comstar has already announced plans to manufacture magnets domestically, seeing the investment as crucial for securing supply chains for its electric motor business.
Despite heavy import dependence, India holds significant advantages. The country possesses the world’s fifth-largest reserves of rare earth minerals, with approximately 6.9 million tonnes, reducing concerns about raw material availability. Indian Rare Earths Limited (IREL), a government-owned entity, operates processing and mining facilities extracting rare earth oxides, producing around 2,900 tonnes of rare earth ore annually. The Technology Development Board has sanctioned funding to support Hyderabad-based Midwest Advanced Materials to produce India’s first rare earth magnets, with reports suggesting investments of ₹1,000 crore over three years.
However, significant challenges remain in the production process, which involves highly technical steps including smelting, separation, and processing—areas where India currently lacks extensive experience. Setting up rare earth magnet manufacturing facilities requires substantial capital investment, with most plants and machinery needing to be imported at relatively high costs. China has developed proprietary technologies and manufacturing processes over decades, giving it a significant technological advantage that India must overcome. Even with aggressive investment, achieving meaningful domestic production will take 1-2 years, according to government officials.
Recognizing that domestic rare earth production won’t solve immediate supply constraints, the Ministry is simultaneously exploring alternative motor technologies that don’t rely on rare earth permanent magnets. MHI plans to convene meetings with automakers to discuss research projects for developing ferrite and reluctance motors—two types of electric motors that can function without heavy rare earth permanent magnets. Companies like Sterling GTake Electric Mobility and Conifer.io are already working on ferrite magnet motors, with plans to supply OEMs within 18-20 months.
The push for rare earth manufacturing carries implications beyond immediate supply security. Rare earth magnets are crucial for defense equipment, making domestic production a national security imperative. Establishing rare earth processing capabilities positions India as a comprehensive green technology manufacturing destination. Diversifying supply sources diminishes China’s leverage and enhances India’s strategic autonomy. Once established, India could become a supplier to other nations seeking to diversify from Chinese sources.
Qureshi’s announcement suggests a multi-pronged approach: engaging with potential manufacturers, developing incentive frameworks, exploring alternative technologies, and building domestic processing capabilities from mining through to finished magnets. The Automotive Industry Association projects that India could meet nearly all its rare earth magnet requirements by 2027 if domestic production capacity continues improving—an ambitious but potentially achievable goal given the strategic importance and government commitment.
As India races toward its EV ambitions with a target of 30% electrification by 2030, securing the supply chain for critical components like rare earth magnets has become non-negotiable. The Ministry’s active engagement with potential manufacturers signals recognition that India’s electric mobility future depends not just on vehicle assembly but on controlling key upstream components.
The India EV Conclave, which brings together policymakers, industry leaders, and technology experts, continues on Wednesday with sessions on battery innovation, supply chain resilience, and charging infrastructure development.