Yves here. This article does not discuss the knock-on effects of China’s new rare earths licensing regime to auto production in the US, as opposed to of US automakers. China has granted rare earths licenses to the three biggest US car manufactures, GM, Ford, and Jeep, and their suppliers. Note the absence of Tesla. No wonder Musk has been trying to de-escalate with Trump.
But there are plenty of foreign players that have final production and even parts manufacture in the US, such as Mercedes, Toyota, and Volkswagen. So it’s not as if US employment and production are not at risk, just not as much as before. Trump.
However, a new CNBC story reports that China is planning to provide relief to EU auto players:
China appears to have offered U.S. and European auto giants something of a reprieve after industry groups warned of increasing production threats over a rare earth shortage.
China’s Ministry of Commerce on Saturday said it was willing to establish a so-called “green channel” for eligible export license applications to expedite the approval process to European Union
However, the initial report of relief to the big US car players, earlier in Reuters, and this new CNBC story, have yet to be confirmed.
In addition, there are all sorts of other manufacturers with products that depend on rare earths…even before getting to arms contractors:
A curated list of Top 10 companies that are heavily reliant on #RareEarths and/or permanent magnets, particularly neodymium (Nd), praseodymium (Pr), dysprosium (Dy) & terbium (Tb) – all critical to EV motors, high-performance turbines, defense platforms & computing
Ref:$MP pic.twitter.com/ZPXzCnJxXE— Roman Iospa (@DevelopAll) June 7, 2025
So even though the already European car industry, already wobbling due to the energy price shock resulting from the loss of cheap Russia gas, is particularly exposed to the impact of the loss of Chinese rare earths supply, it’s not as if they lack company.
And keep in mind, we have yet to see how fast any expedited rare earths approval turns out to be.
By Irina Slav, a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. Originally published at OilPrice
- China’s new rare earth export restrictions are throttling global supply chains, posing a direct threat to Europe’s auto industry and its mandated EV rollout.
- Automakers warn of looming shutdowns due to complex and slow licensing requirements for rare earth magnets.
- The crisis exposes dangerous overdependence on China, sparking renewed calls in the EU and U.S. to build independent rare earth supply chains.
China earlier this year introduced restrictions on its exports of rare earths. The move marked a new stage in the US- China trade spat, when the two sides no longer tried to out-tariff each other but took to more concrete steps. The problem is, the restrictions don’t just apply to U.S. companies. And they may well deliver the fatal blow to Europe’s struggling auto industry.
China controls 90% of the world’s rare earths processing capacity. It is the indisputable, if not exactly celebrated in the West, master of the rare earths industry. And now, it is using this position to make a point to trade partners that have gone above and beyond to restrict Chinese exports to their own countries and regions—essentially the same thing that Washington does when it uses the dominance of the dollar to sanction governments it doesn’t see eye to eye with.
Rare earths are used in a perhaps surprisingly wide variety of products. More specifically, it’s rare-earth magnets that are troubling carmakers on both sides of the ocean. “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, an industry body, wrote in a letter addressed to the Trump administration in early May.
The letter, cited by Reuters in a recent report on the rare earths restrictions, is one of what looks like a cry for help that is only going to get louder. It was signed by auto industry leaders including Toyota, Volkswagen, and General Motors, which thanked the administration for trying to resolve the issue. If they didn’t, the carmakers said, it would be only a matter of time before car factories started shutting down.
The same is happening in Europe, and it’s worse—because with Trump, U.S. carmakers no longer have to worry about EVs. With the current European parliament and the Commission, local carmakers do have to worry about EVs, a lot. Because EVs feature greater amounts of those rare earths than internal combustion engine cars. And European carmakers have been mandated with the production and sale of certain minimum numbers of these EVs over the next three years.
“I informed my Chinese counterpart about the alarming situation in the EU car industry — the rare earth and permanent magnets are essential for industrial production… this is extremely disruptive for industry,” the European Union’s trade commissioner, Maros Sefcovic, said this week, as quoted by the Financial Times. He added that the “Carmakers are warning of huge production difficulties in a short period of time.”
The clock, in other words, is ticking and China does not really seem in a hurry to stop it. The restrictions that Beijing implemented in mid-April are not literal—or direct. They are in the form of a new licensing regime for anyone who wants to buy rare earth magnets from Chinese producers. To do that, the prospective buyer needs to apply for a license, provide a substantial amount of information, and wait. As a Bosch spokesperson described it, the application process was “complex and time-consuming, partly due to the need to collect and provide a lot of information.”
Because of this complexity, only a few car parts suppliers have been granted such licenses, making the car companies’ freak-out only a matter of time, really. But this is coming at a really bad time for European carmakers, despite the substantial rise in EV sales. They are still to turn in a solid profit on their electric cars and they are supposed to be making ever more of these—which means a lot more rare earths.
Things are not that swell in the United States, either, after President Donald Trump accused the Chinese of violating a deal the two earlier agreed, on the temporary relaxation of trade warfare, including tariffs and other trade restrictions—only to be slapped back with the accusation that he did that first, by restricting semiconductor exports.
Things are not looking good for the car industry right now but there is, as always, a silver lining. It consists in the fact that the world is entirely dependent on a single source of rare earths and this is not a sustainable or secure state of affairs. There has been a lot of talk in both Europe and the United States about building their own supply chains in such critical materials but action has not really been forthcoming. Even if it was, building a supply chain from scratch takes many years—just ask China. Yet the rare earths drama may boost Europe’s resolve to actually start working on that supply chain, however long it takes to build it. Import dependence can be fatal.
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It would be interesting if the Chinese threw the EU a lifeline to deliver rare earths while keeping the US car manufacturers on a starvation diet of the same. That way they could get the EU to ‘owe’ them and remove restrictions that they have put on Chinese companies while putting pressure on the Trump regime by all those businesses that rely on those rare earths.
It would be interesting if the Chinese threw the EU a lifeline … they could get the EU to ‘owe’ them and remove restrictions that they have put on Chinese companies
More than ‘interesting,’ it’s pretty much a strategic no-brainer since it will conclusively end US hegemony, except in the addled minds of Washington’s players.
What the Chinese are looking for is for companies to build plants in China to make products with the rare earths there then ship finished products to their ultimate destination. As I understand it, finished products aren’t subject to the export restriction’s.
They’re won’t prioritize German automakers, but actually France and the UK both together and separately still have some small domestic rare earths production capability, with France having most of what exists globally that isn’t now Chinese.
Specifically, French capability is big enough that they’re making claims they’ll supply 15% of global heavy rare earth demand by 2026, using recycled materials and imported concentrates. Forex —
https://www.solvay.com/en/press-release/solvay-advances-european-rare-earths-production-through-capacity-expansion
The UK’s is smaller but has both production and processing capability —
https://lesscommonmetals.com/
So just conceivably, if those countries’ governments prioritize their own domestic situations — as London just did the de facto nationalization of British Steel — they might have enough to go some way towards taking care of their own IT-type manufacturing needs.
But auto manufacturing — as in foreign, as in German — will not be on their list.
Sorry. Correction: France claims it can 30% of European demand by 2030.
You might have a point about Germany. They just took a survey in Russia and it seems that people now consider Germany to be the new top enemy-
‘Russians do not consider the US “the most unfriendly country” anymore, and the title now goes to Germany, according to a survey by the Levada Center, a Western-funded organization which has been designated as a “foreign agent” in Russia.
The US has lost the top spot for the first time in 13 years, dropping to fourth place in the poll, which was published on Thursday.’
https://www.rt.com/russia/618794-us-germany-uk-ukraine/
It took a lot of work but Scholz and Merz managed to do it.
Re Germany and the above–not only do we have a truly huge German auto plant but BMW had said they aimed to mostly switch to EV production by the end of the decade. They are building a battery plant in the county.
Perhaps Lindsey should be talking about that instead of trying to make more trouble for Russia. But our dysfunctional political situation means that figures like him get re-elected no matter what they do unless a sex scandal or gold bars in the closet.
Republicans wake up.
I recall Major General Apti Alaudinov, of the recent Kursk counter-offensive fame, in an interview last week mention noticing that German or Polish “mercenaries” don’t get to surrender to Russians due to a certain emotional baggage the front line troops have re-discovered.
Great, we’re going to create giant dirty and polluting processing facilities so that we can engage in unrestrained international aggression. Good times.
What’s remarkable is how well-timed this was, given that China could’ve played this card anytime over the past few years.
Half of Americans now hate Trump so much that cheering on China taking down (Trump’s) America is firmly within the Overton window, as opposed to rallying around the flag in more normal times. Meanwhile, Europe is so paralyzed with its own response to Trump that they can’t coordinate a response or even form a narrative that they’re doing anything other than mild rebukes (while they’re tied up in negotiations with China itself!)
None of this would’ve been conceivable a year ago.
I believe China saw the writing on the wall during Trump 1. They’ve been preparing for 8 years to go their own way without needing the US. Biden only re-enforced their desire. Currently the US only represents 13% of Chinese exports. They can get that back simply by boosting domestic consumption. Which seems to be what they’re doing these days.
I’m not sure there’s any coming back from this over-dependence. My take is that the cultural center of the world is shifting east and there’s nothing the west can do about it.
Is it possible that there is a deal here between China which is in trouble lacking airplane engines and Airbus i.e. EU/automobile industry?
Its only a matter of a short period that if you deny them aircraft engines they will build their own, and probably better and less expensive than GE,RR, and the others.
And I would assume they are already working hard on that
Its been pointed out that since almost all RE come from China in some form, even things like electric seat motors, window motors, steering motors, brakes etc all now how RE motors. Meaning a simple $20 part prevents the $80,000 car from being built and thats all cars, so talking about just europe cars is meaningless.
Then you have the issue of types of RE with a major sub category being high temperature ones, which are needed for high capacity motors especially EV motors. It turns out that China has one if not the only known deposit of such material.
The idea that the US can be self sufficient in all things is just not possible in today’s complex material world. Like the whole steel and aluminum tariffs. Lets say that we do become 100% self sufficient in steel for cars, but we don’t make tires, and the list goes on and on and on for which we don’t make and we don’t have the raw materials to make.
They could go back to roll-up window handles, manually set locks with normal keys, the handle under the seat for its position, the lever that changes the steering wheel position… etc. of course they would have to retool the production lines completely. Yup they’re likely going to have to invest more one way or another. Either retool, or close and move factory. I personally would like the retooling. All that electrical carp just tends to malfunction sooner than its mechanical counterparts of yore.
Those poor poor shareholders, they might see all those yummy dividends and buybacks dry up. Whatever will they do?
Roll up windows would mean rolled down prices to something more reasonable. I still pine for my old Volkswagen Beetle, not fast but fun to drive and where nothing was electric, except for the Blaupunk radio that never worked anyway.
Starter motors would be nice to keep, but the old hand crank starter from the model T might still work in some cases. Jump starting for those who live on hills…
Hand cranking is what turn boys into men. :)
https://www.youtube.com/watch?v=ROnb5ouBjNc
All that available right now for affordable* prices starting from 1 487 000 ₽ :)
https://www.lada.ru/en/cars/niva-legend/black
Now we know why the sanctions. :)
* Less and less affordable in $.
A lack of forethought coupled with assumptions as to what the other party will and will not do stirred with the foolishness of, metaphorically, putting almost all of your eggs in one basket and you arrive at the insoluble dilemma. Well, perhaps not insoluble in the long term, but then there is that saying, “in the long term we shall all be dead.” This situation is akin to painting oneself into a corner. Reminds me of the scene in Blazing Saddles that ends with the words, “You know … morons.”
Doesn’t the collective US tech (including medical tech) industry use a larger metric tonnage of REE’s than the US automotive industry?
https://onlinelibrary.wiley.com/doi/full/10.1111/jiec.13354
And wouldn’t there be a much larger impact on US society than if tomorrow the US couldn’t make cars anymore?
(Apologies, I tried to find the amounts over at BEA, had to give up. Perhaps someone has better sources for this?)
US foreign policy, regardless of the denomination of leadership, seems to be intent on ccontaining and curtailing China. Why would China be so enthusiastic about supplying rare earths to the US military industrial complex? OMG, Lockheed, Boeing, et al will have to rob vehicles like the Russians supposedly did with washing machine chips. Where was the US on this 20 years ago? Note: This deficiency has beeb obvious to this writer for quite awhile. I remember asking a friend, a contract pilot: Why was the US & NATO in Afghanistan? His reply: Rare earth minerals. Classic Trump; never consider consequences and then bend down and KA.
I’m no friend of Chinese commerce. BYD just had a plant shut down in Brazil for practicing slavery. They housed workers in filthy units with few facilities and paid them only 40% of their promised wages and paid that in Yuan!
Chinese have no business ethics. They have no word for “promise”.
Worse by far than Western business because there’s no public outrage in China when BYD gets caught. Not like Apple who got tons of grief for it’s labor practices.
Unfortunately , I have to buy Chinese stuff for my shop. Fact is, I couldn’t do metal work without it. Small things I need are still the same price but the free shipping is now 20 bucks on a $10 item. The lathe I bought 6 years ago has almost doubled in price. These things will never go back down to near where they were. The damage is permanent.
Chinese have no business ethics. Sure, buddy, They are no match for the business ethics we have here in the “civilized west”.
Tis a shame…
China’s Grip on an Obscure Rare Earth Metal Threatens the West’s Militaries – The New York Times archive
How many people work on the F35 program in how many states?
“takes many years—just ask China.” Umm, sure, it was a throwaway line, but it is also ignorant. Decades for the US, if it were even to be seriously tried (as opposed to just pontification).
Its not as if the US does long-term planning anymore (everything is quarterly profit report-driven or 4-year election cycle-driven).