China’s rare earth curbs rattle Europe’s auto industry as plants shut down

Growing fallout from China’s decision to tighten control over rare earth exports is rippling across European manufacturing, with some auto parts plants suspending output and major companies like Mercedes-Benz and BMW evaluating supply chain safeguards to avoid further disruption, according to recent material by Reuters.

In April, Beijing suspended exports of a broad range of rare earth elements and associated magnets, a move that has jolted supply chains crucial to industries including automotive, aerospace, semiconductors, and defence. China controls roughly 90% of global rare earth production, giving it immense leverage over international markets. The export restrictions — seen as part of a broader retaliation against US tariffs under President Donald Trump — have global implications despite targeting Washington.

In Brussels, EU Trade Commissioner Maros Sefcovic said he and his Chinese counterpart had agreed to work swiftly to clarify the situation. Meanwhile, EU Commissioner for Industrial Strategy Stephane Séjourné said the export curbs only strengthened the EU’s resolve to reduce dependency on critical materials from China. The European Commission has identified 13 new projects outside the bloc aimed at diversifying the supply sources of essential metals and minerals.

Mercedes-Benz production chief Joerg Burzer said on June 4 that the company is holding discussions with top suppliers about building stockpiles of rare earth materials as a buffer. Although Mercedes-Benz has not yet experienced disruptions, other manufacturers are not as fortunate. BMW reported that while some suppliers are affected, its own production lines are still operational.

CLEPA, the European association for automotive suppliers, warned that several production lines had already shut down due to depleted supplies. Of the export license applications submitted by auto suppliers since early April, only about 25% have been approved, the group said. Some rejections were due to “highly procedural grounds,” it added, without naming specific companies.

The impact is spreading. German and American automakers have joined Indian electric vehicle manufacturers in warning that the Chinese controls pose a threat to global production. In Germany, Wolfgang Weber, CEO of the country’s electrical and digital industry association ZVEI, said companies are worried they may only have sufficient supplies for a few more weeks or months. “Companies currently feel abandoned by politicians and are partly looking for solutions to their difficult situation on their own in China,” Weber stated.

While some firms have so far avoided disruption, they remain on alert. Swedish supplier Autoliv—the world’s largest manufacturer of airbags and seatbelts—said its operations remain unaffected, but CEO Mikael Bratt has formed a task force to manage potential risks.

Carmakers like General Motors, BMW, ZF, and BorgWarner are all actively developing or researching electric motors that use little or no rare earth content to reduce reliance on Chinese supply chains. BMW, for example, now uses magnet-free motors in its newest electric vehicle lineup, though it still depends on rare earths for smaller components such as window regulators and windshield wipers.

Volkswagen said on June 4 that it has not encountered any shortages so far.

The rare earth restrictions have also escalated trade tensions between Beijing and Washington. President Trump has criticised China’s slow pace in easing export curbs, accusing Beijing of breaking last month’s truce to reduce tariffs and trade barriers. Trump’s efforts to reshape US-China trade have included tariffs as high as 145% on Chinese imports, which he partially scaled back following sharp market reactions. China responded with tariffs of its own and is now using its grip on critical materials to pressure Washington.

Trump and Chinese President Xi Jinping are expected to speak later this week, with rare earth exports likely to feature prominently in their discussion. In a social media post on June 4, Trump wrote: “Xi is VERY TOUGH, AND EXTREMELY HARD TO MAKE A DEAL WITH,” underscoring the tenuous nature of any potential trade resolution.

By Tamilla Hasanova