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Photo = Yonhap news |
[Alpha Biz= Kim Jisun] The global automotive industry is facing a major disruption following China's suspension of rare earth exports, a move widely seen as a countermeasure to the U.S. tariff hikes. As the world’s dominant supplier, controlling over 90% of the rare earth market, China has effectively halted shipments for two consecutive months, triggering alarm among major automakers.
Rare earth elements are essential for the production of key components such as motors, sensors, speakers, and headlamps. The situation has been exacerbated by the U.S. government's recent decision to double tariffs on steel and aluminum imports (from 25% to 50%), in addition to the existing 25% auto tariffs—adding further upward pressure on car prices. U.S. brokerage Bernstein estimates that the new tariffs could increase vehicle production costs by up to $7,000 per unit.
According to industry sources and international media reports on June 4, the Alliance for Automotive Innovation (AAI) sent a confidential letter to the U.S. government on May 9, warning that rare earth shortages could halt factory operations in the U.S. The AAI, whose members include Ford, Stellantis, BMW, Hyundai, and Toyota, emphasized the risk of production disruptions in essential components such as automatic transmissions, motors, sensors, seatbelts, speakers, lighting systems, and cameras.
The crisis is not limited to the United States. On June 3 (local time), the German Association of the Automotive Industry (VDA) expressed concern that rare earth supply issues could delay or halt automotive production in Germany. India’s largest EV manufacturer, Bajaj Auto, also stated that “serious disruptions to production are expected.”
The supply bottleneck began when China imposed new export controls on April 4, requiring government approval to export seven types of rare earth elements and rare-earth-based magnets. Even with approval, the licensing process takes at least 45 days. As a result, China’s rare earth exports dropped to approximately 4,785 tons in April, a 15.6% decline from March's 5,666 tons. With the restrictions continuing into a second month, automakers relying on stockpiles are reaching their operational limits.
Hyundai Motor and Kia are reportedly unaffected for now due to their substantial reserves of rare earths. However, analysts warn that a prolonged export ban could eventually impact production.
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
