As of press time, a series of chain reactions have begun to emerge in the automotive industries of countries and regions such as Europe, India, the United States, and Japan.

According to recent reports by foreign media, last week China’s newly introduced tracking system for the rare earth magnet industry officially took effect. The system, which requires producers to submit information online such as transaction volumes and customer names, is not only a technological regulatory upgrade but also seen as a clear signal of the long-termization of China’s rare earth export controls—directly impacting the automotive and semiconductor manufacturing industries that heavily rely on Chinese rare earths.

As of press time, the automotive industries in countries and regions such as Europe, India, and the United States have begun to experience a series of chain reactions.

According to data from the U.S. Geological Survey (USGS) and multiple research institutions, China accounts for nearly 70% of global rare earth production, over 85% of global rare earth ore processing capacity, and more than 90% of global rare earth magnet processing and supply. China's pivotal role in the rare earth supply chain has made it a key bargaining chip in international trade games.

In recent years, in response to the United States' continuous escalation of technological blockade measures such as semiconductor export controls and Entity List sanctions, China has lawfully implemented precise countermeasures against rare earths and related technologies based on national security and development interests. The specific countermeasures are as follows:

At the end of May 2025, He Yongqian, a spokesperson for China's Ministry of Commerce, responded to questions about China's dual-use items export controls: "Implementing export controls on items with obvious dual-use military and civilian attributes is a common international practice. This reflects China's consistent position of safeguarding world peace and regional stability."

A Reuters report on June 4 stated that since last week, China's newly introduced tracking system for the rare earth magnet industry has officially taken effect. The system requires producers to submit transaction volumes, customer names, and other information online. The media noted that this move is not only a technological regulatory upgrade but also indicates that China's export controls on rare earths and related magnets may become a long-term policy, directly impacting the automotive and semiconductor manufacturing industries that heavily rely on Chinese rare earths.

As of now, the impact of China's control policies has begun to emerge. Due to the complex and lengthy export license approval process, China's rare earth magnet exports plummeted by nearly 50% in April this year. According to Chinese customs data, rare earth exports reached 3,056 tons in April, compared to 5,842 tons in March, a month-on-month decrease of 2,786 tons (approximately 48%).

Under the influence of China's export controls on rare earth materials, a series of chain reactions have already emerged in the industry.

Europe's automotive production is in crisis: On June 3, 2025, the German Association of the Automotive Industry (VDA) issued its first warning of "the possibility of production delays or even interruptions." The European Association of Automotive Suppliers (CLEPA) revealed that only about one-quarter of the hundreds of license applications submitted since early April this year have been approved. Multiple European parts factories and production lines have been forced to shut down, and the situation may further deteriorate. If no solution is found, more production lines are expected to halt within three to four weeks.

India's automotive production is on the verge of suspension: Previously, the Society of Indian Automobile Manufacturers (SIAM) has informed Indian government officials that inventory among automotive parts suppliers may be exhausted by the end of May this year, and automotive industry production is expected to "gradually paralyze" starting from early June. On June 2, Indian Minister of Heavy Industries HD Kumaraswamy stated that the Indian government plans to dispatch a delegation of industry executives to China within two to three weeks to discuss restrictions on rare earth magnet exports with the Chinese government.

U.S. automakers have begun warning that rare earth supply shortages caused by China's export controls could force them to halt production and close factories. Vehicle motors require large quantities of rare earths, and factory robots also rely on rare earths to operate. Against this backdrop, the U.S. is attempting "indirect solutions."

Additionally, Japan's Suzuki previously announced plans to suspend production of its compact car "Swift" (excluding the high-performance Swift Sport model) from May 26 to June 6 due to parts shortages. Although the company did not elaborate, a spokesperson declined to comment on the reasons for the suspension. However, media reports citing informed sources said Suzuki halted Swift production due to China's rare earth export controls.

According to a recent report in The Wall Street Journal, facing the threat of factory closures in the coming weeks, some U.S. automakers are considering relocating production of components such as motors containing rare earth magnets to China, or shipping U.S.-made motors to China for magnet installation before re-importing them—since China's restrictions target magnets themselves, not finished components containing magnets. Foreign media have mocked this as a "boomerang" effect on Trump's "manufacturing reshoring" policy.

Despite countries accelerating investments in alternative sources (such as Australia's Lynas and new rare earth separation plants in the U.S. and Europe), experts note that China's years of accumulation in rare earth refining technology and production capacity have created significant barriers. The U.S. Geological Survey (USGS) has stated that between 2020 and 2023, 70% of the U.S. rare earth compounds and metal imports were dependent on China, with its refined rare earth supply dependency reaching as high as 92%.

In response, the U.S. is adopting a multi-pronged approach to increase rare earth supply sources, but faces enormous obstacles.

On one hand, restarting domestic mining in the U.S. has been difficult. The Trump administration has pushed for "America First," aiming to accelerate domestic mining permits. However, years of regulatory inefficiencies, environmental pressures (ESG), and "NIMBYism" (Not In My Backyard) have severely hindered progress. Currently, the only rare earth mine operating in the U.S. is Mountain Pass in California, which remains heavily dependent on China for refining and processing.

On the other hand, beyond attempting to mine rare earths domestically, the U.S. is also addressing supply chain risks through partnerships with allies. The Trump administration has continued resource strategies, such as actively promoting bilateral cooperation with countries like Australia and Mozambique, and using newly established financial tools (such as fast-track approval and financing support) to invest in overseas projects, including graphite mining in Mozambique and rare earth processing facilities in Australia.

Notably, Greenland, rich in rare earths, is seen as a potential alternative source. However, the region lacks infrastructure, faces harsh climates, and suffers from a shortage of skilled workers. Additionally, Trump's controversial remarks about considering "military force to acquire Greenland" have scared off investors. While deep-sea mining holds potential, it faces strong environmental opposition and legal restrictions due to the U.S. non-ratification of the United Nations Convention on the Law of the Sea.

Industry insiders generally believe that China is unlikely to lift its rare earth export controls in the short term. The "rare earth supply chain crisis" triggered by resource issues will force a deep global industrial adjustment. Currently, countries and enterprises are accelerating efforts to develop mining, processing, and recycling projects outside China, but building mature and sufficient alternative supply chains will take years and require enormous investment. Meanwhile, technological breakthroughs such as developing dysprosium-free magnets, finding rare earth substitute materials, and improving recycling efficiency can partially alleviate the rare earth gaps in these countries and regions.

In January this year, Grace Lyn Baskaran, Director of the Critical Minerals Security Program at the Center for Strategic and International Studies (CSIS), published a commentary noting that the U.S. urgently needs to reduce its dependence on China for critical minerals, establish alternative procurement partnerships, and provide sustained diplomatic and financial support—steps crucial for long-term supply chain security.

The launch of China’s tracking system for rare earths may signal that export controls are entering a phase of refinement and normalization. Against this backdrop, both the production line alarms at European automakers and the "roundabout tactics" of U.S. manufacturers reveal that global high-end manufacturing will remain subject to China’s rare earth export policies until stable and sufficient alternative solutions are found.