In April, China tightened export rules for rare earth minerals. Seven of the 17 major rare earths now require a special government license to leave the country. But dig a little deeper and you’ll find that rare earths aren’t technically rare. They’re scattered across India, Australia, Vietnam, and the U.S.

So why the panic? Because rare earths are quite common, but they’re found in very small concentrations. They’re expensive, toxic, and messy to extract, and it’s even harder to separate one rare earth from another. This is where China has had a huge advantage for years.

In the 1980s and 1990s, China made a strategic decision: it would monopolize the rare earth mineral market. It offered cheap land, easy permits, and minimal environmental regulations. Western countries gave in, and rare earth mines and refineries outside China closed one by one. Today, China controls about 70% of the world’s rare earth production and about 90% of its processing. So when China reduces exports, it’s a real pain in the world. In April alone, rare earth exports fell by more than 15%.

Even if every alternative supplier—Australia, Vietnam, Malaysia—increased their rare earth production today, they would still only be able to meet a fraction of that demand. Take Australia, for example. It has the world’s fourth-largest rare earth deposits and a major miner called Lynas. But its total production last year was only about 13,000 tons, less than 5 percent of China’s production. Vietnam has vast reserves but lacks the processing technology, while Malaysia processes ore but doesn’t mine much. The U.S. is trying to recycle these minerals from old electronics, but that’s early days because the volumes are so small and the logistics are complicated. Which brings us to India.

India has about 7 million tons of rare earth reserves—the world’s fifth-largest. But by 2023, it will produce only 2,900 tons, or less than 1 percent, of global production. Because for decades, rare earth mining in India was dominated by a single public sector firm, IREL (India Rare Earths Limited). For a long time, IREL focused mostly on extracting monazite sand from beach minerals for nuclear use. It never built commercial refining capacity for all the other rare earth minerals available, and the private sector was not brought into the game.

As a result, most of the rare earth magnets used by the Indian automotive sector come from China. These are specifically called NdFeB (neodymium-iron-boron) and SmCo (samarium-cobalt) magnets. They are used in everything from seat motors to the main electric drivetrain. These magnets cannot be replaced in a short time without redesigning the entire system, which can take years. So what is India doing about it, you ask?

In the short term, the Indian automotive industry and companies are lobbying the government to use diplomatic channels and ask China to approve the magnet shipments already in the pipeline. Sure, this may save time, but it will not solve the larger problem. Some companies are even trying to localize magnet production by partnering with IREL. But the numbers don’t add up.

On the policy front, the government has launched a Critical Minerals Mission, auctioned new exploration blocks and increased mining norms. But here’s the thing. Even with huge investments, it takes around 6 years to set up a rare earth mine in India. So, building an entire supply chain from the mine to the magnet could be a long process. In the meantime, the government may have to diversify its sources by signing trade agreements with rare earth-rich countries.

The real issue here is not just about rare earth magnets. It’s about how entire industries can be brought to a standstill by a supply chain with a single point of failure. Especially in today’s tariff-driven, geopolitically tense world.

There’s another layer. India’s FAME subsidies and EV targets assume that critical imports like batteries, chips, magnets will continue to flow from China. But if magnets are held up for even a few months? Production will grind to a halt. EV players will miss deadlines. If they miss deadlines, subsidies will disappear.

There are glimmers of hope, though. Some players are experimenting with ferrite magnets or magnetless switched reluctance motors. Others are trying to partner with global firms to build refinery capacity here. There is talk of new mining bids and offtake deals with Australia and Vietnam. But the longer we remain dependent on a single supplier, the more exposed we are to the next big shock. So everyone may have to tighten their belts.