This was supposed to be the year that electric vehicles finally made their mark in India, the world's third-largest auto market. But China had other ideas.
China has a stranglehold on global processing capacity for rare earths, which are crucial for magnets that power the engines in EVs, and it has been wielding that dominance in recent months in trade spats with the U.S. and others.
India, increasingly at odds with its giant neighbour over border disputes and competing with it for influence in the region, is particularly vulnerable.
Industry executives worry, moreover, that other supply chain snags may loom on the horizon, given India's reliance on China for EV batteries as well. Tata Motors and Mahindra & Mahindra, two of India's biggest EV makers, depend almost entirely on batteries from China's BYD Co and Gotion.
China's decision in April to restrict its exports of rare earth materials and magnets comes at a crucial time for India, with several EV launches lined up this year including the first from its top carmaker, Maruti Suzuki.
Maruti has been forced to cut its near-term production targets for its e-Vitara EV due to rare earth supply constraints, while hoping to recover lost ground later in the year as availability improves - an approach analysts say other Indian automakers could adopt to avoid a complete output halt.
Bajaj Auto, a major producer of electric scooters in India, has also warned of a serious cutback in EV production by July if Beijing does not approve rare earth import permits soon.
While India has initiated talks with China on stabilising supplies, the industry fears progress could be slow, not only because Beijing is overwhelmed with similar requests from across the world, but also given the tense relationship between the two Asian giants.
Five years ago, in a move aimed at Chinese corporate takeovers in India that New Delhi saw as opportunistic, the trade ministry placed restrictions on investments from nations that share a land border with India. Chinese automakers BYD Co and Great Wall Motor were both forced to drop billion-dollar investment plans for Indian car manufacturing.
Since 2020, New Delhi has banned dozens of Chinese apps such as TikTok and WeChat over national security concerns, and is yet to resume direct flights between India and China that were halted during the pandemic.
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