Auto Industry Struggles As Supply Chain Issues Threaten Production Amid China's Export Curbs On Rare Earth Minerals: Report

Several automakers globally are struggling to cope with Beijing's restrictions on exports of rare earth materials, a crucial element in producing various parts in vehicles.

What Happened: "The whole car industry is in full panic. They are willing to pay any price," a source told Reuters on Monday, highlighting the desperation among automakers and suppliers to procure rare-earth alloys and magnets.

The report also mentioned that some companies imply their production could be idled by mid-July.

China controls over 70% of the rare-earth mining as well as over 90% of the global rare-earth alloy and magnet production, the report suggests.

Some plants in Europe have already shut down, while others will be closing soon if things do not improve, CLEPA (European Association of Automotive Suppliers) said to Reuters.

However, the report also outlines that automakers like General Motors Co. (NYSE:GM), as well as major parts suppliers, have been working on low-to-zero rare-earth metal motors, but are struggling to scale up production to cut costs.

Why It Matters: The news comes in as China has granted temporary export licenses to rare-earth suppliers of General Motors, Ford Motor Co. (NYSE:F) and Stellantis NV (NYSE:STLA).

Automakers throughout the globe have sounded alarms regarding the significant impact of China's export curbs on auto production worldwide. "If the situation is not changed quickly, production delays and even production outages can no longer be ruled out," a spokesperson for a consortium of German automakers had said.

Amid the trade tensions, Tesla Inc. CEO Elon Musk reiterated the importance of strengthening local supply chains. The billionaire believes it is key to "mitigate any geopolitical risk."

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