China's Heavy Rare Earth Restrictions Bite, Pressuring Global Automakers to Find Alternatives

China has tightened its rare earth export controls twice in 2025. Restrictions on seven categories of medium and heavy rare earth items, effective since April, remain in force. Although the newly added controls on five elements and processing equipment announced in October have been temporarily suspended, their impact is already evident. China controls approximately 90% of global rare earth refining capacity and magnet production. Critical automotive components heavily rely on rare earth permanent magnets, with demand from electric vehicles growing exponentially. A senior Toyota executive in North America previously warned that a supply disruption could halt Japan’s auto industry within two months. Countries are now depleting stockpiles while struggling to develop alternative sources. Automakers such as Ford and Suzuki, along with Indian component suppliers, have already felt the strain. Japan and the U.S. are intensifying cooperation to diversify supply chains, including joint development of resources at Minamitorishima (Marcus Island). Europe, the U.S., and Australia are accelerating overseas exploration and recycling initiatives. However, overseas alternatives face triple bottlenecks: performance limitations, high costs, and lengthy timelines. Meanwhile, China is shifting from resource control toward technological leadership—driving down costs for cerium-containing neodymium-iron-boron magnets and positioning itself in emerging demand sectors like robotics and the low-altitude economy. The global auto industry finds it increasingly difficult to circumvent China’s evolving rules.