China Delays Rare Earth Supply... Concerns Over Global Auto Parts Production Shutdown

Supply significantly delayed after switching to rare earth export license system in April

German auto lobby group warns "potential halt in parts production"

In response to the U.S. tariff war, China switched its rare earth exports to a licensing system in April, putting major auto manufacturers at risk of production stoppages due to an impending rare earth shortage.

According to Reuters on the 3rd (local time), Germany’s auto lobby group warned that China's rare earth metal export restrictions are causing delays in the supply of rare earth elements used in products such as wiper motors and ABS sensors, and could soon lead to production stoppages.

Hildegard Müller, head of the German auto lobby group VDA, pointed out that export licenses for rare earths from China are being issued slowly, and customs clearance for exports with valid licenses is being delayed. As a result, auto parts suppliers are at risk of having key component production nearly grind to a halt, threatening the smooth continuation of auto manufacturing.

Previously, in April, China implemented new regulations requiring government approval for rare earth exporters. Since then, diplomats and automotive executives from India, Japan, and Europe have been seeking urgent meetings with Chinese officials to push for swift approval of rare earth magnet exports.

When it comes to rare earths, there is virtually no alternative to China. Thus, China is managing rare earths as a major source of diplomatic and trade leverage. President Trump also recently accused China of violating trade agreements with the United States by delaying rare earth supplies.

Organizations representing major automakers, including General Motors in the United States as well as Volkswagen, Toyota, and Hyundai, have warned that if suppliers cannot produce key components that require rare earths, plants could be forced to shut down within weeks. Rare earths are essential for manufacturing a variety of core auto parts, from transmissions to sensors and cameras.

Müller of the VDA said that while China has granted licenses to a small number of rare earth producers, including suppliers to Volkswagen, the quantity is insufficient for smooth production. The German auto parts company Bosch said last week that suppliers are struggling due to China’s stringent export license procedures. Müller stated, “If the situation does not change quickly, we cannot rule out production delays or even stoppages.”

Contributed by Kim Jung-ah, guest reporter kja@hankyung.com