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China’s Rare Earth Export Restriction Impacts Global Automotive Supply Chain

Automotive

Business Honor
06 June, 2025

China’s rare earth export restriction impacts supply chains, causing European plant shutdowns and raising concerns over production delays.

China’s export restriction on rare earth elements has affected the automotive industry worldwide, raising tension across the industries. CLEPA, the European industry group, has confirmed the shutdown of several supply plants due to the shortage of materials.

China’s Ministry of Commerce has imposed export restrictions as a response to the tariff imposed by President Donald Trump. The restricted elements are widely used in the manufacturing of the energy sector, automotive, and defense. Also play as an essential component in electric vehicle and combustion engine production.

German automaker BMW reported issues with its network of suppliers, while Mercedes-Benz and Volkswagen claimed stable supply for the time being. Mercedes-Benz's representative also disclosed their new plan to find a new alternative source and to reduce the use of rare earth elements.

According to the CLEPA’s report, out of several export license applications submitted to Chinese authorities, only 25% of them are approved. Due to slow customs clearance, the approved shipments are also facing delay.

China being the powerful force of the global rare earth market, China and Europe both depend on each other to keep global trade and supply chains running efficiently. The ongoing tension is forcing the European buyers to look forward for an alternative source, but these solutions take time and won’t fix the current supply problems. The situation will get worse if the restrictions continue, impacting car production and threatening thousands of jobs.