India may ease EV localisation rules as China's rare earth export curbs hit supply chain

Importing motors from China or elsewhere won't only impact local production—it might inflate EV prices
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India is mulling easing its 50 percent localization requirement for electric vehicle (EV) makers and suppliers as the country is faced with global rare earth supply chain disruptions. The decision follows China's recent export curbs on rare earth elements—key materials employed in manufacturing magnets for electric motors.
Although the Society of Indian Automobile Manufacturers (SIAM) has yet to formally request a policy change, key stakeholders have raised concerns in closed-door discussions with government officials, a report by Bloomberg stated.
Also Read : Rare earth magnet supply crisis has no impact on production so far, says Skoda India Rare earth squeeze tests local plans
The Indian government had pinned its EV growth strategy on the Production-Linked Incentive (PLI) scheme, which rewards domestic manufacturing. But China's April crackdown on rare earth exports compelled Indian automakers to rethink their strategy. Since rare earth-based permanent magnets are the foundation of traction motors, manufacturers now have major challenges in ensuring local content requirements. To dampen the effect, the government has informally guided OEMs to import complete motors or parts assembling in the meanwhile. Suppliers face mounting pressure
The change is a significant setback for Indian auto part suppliers who have been investing heavily in bringing forward advanced EV components like Permanent Magnet Synchronous Reluctance Motors (PMSRM) locally. Without the critical raw materials, these suppliers could fall short of being eligible for PLI—just as they were reaching critical milestones. Moreover, waiting on alternatives may further put Indian companies behind international players.
Also Read : No impact of rare earth magnet shortage on production so far: Maruti Suzuki Chairman Cost hikes threaten affordability
Importing motors from China or elsewhere won't only impact local production—it might inflate EV prices. Industry sources say shipping a motor via sea adds around ₹ 2,000 per vehicle, while air freight might raise costs by as much as ₹ 5,000 for smaller EVs like two-wheelers. This surge could drive away consumers and impact sales volumes in a price-sensitive nation such as India.
India's push toward EV self-sufficiency now faces a steep climb. Unless Indian supply chains are able to rapidly redirect or identify different sources of rare earths, relaxing localization targets will be the only way to maintain momentum in the near term.
Get insights into Upcoming Cars In India, Electric Vehicles, Upcoming Bikes in India and cutting-edge technology transforming the automotive landscape.
First Published Date: 15 Jun 2025, 08:27 AM IST

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