India’s plan to build a homegrown rare-earth magnet industry is gathering pace after China’s export curbs exposed a critical weakness in global supply chains. But industry executives say government incentives alone will not be enough. The real challenge is securing the raw materials needed to reduce the country’s dependence on Beijing.
When China tightened export controls on rare-earth materials earlier this year, the impact rippled far beyond its borders. Automakers slowed production, supply chains came under strain and governments were reminded of just how dependent the world remains on one country for a resource that powers everything from electric vehicles and fighter jets to wind turbines and smartphones.
For India, the disruption reinforced an uncomfortable reality.
Despite having the world’s third largest rare earth resources, the country imports nearly 85-90 per cent of the rare-earth magnets used by its automotive, electronics, defence and clean energy industries, with China dominating the global supply chain. In FY25 alone, India imported nearly 54,000 metric tonnes of rare-earth magnets.
That dependence has prompted New Delhi to launch a Rs 7,280-crore incentive scheme to create a domestic rare-earth permanent magnet industry — a move that has become as much about national security and economic resilience as industrial policy.
But companies looking to invest say financial incentives are only one piece of the puzzle.
The missing link
“The Rs 7,280 crore scheme is a landmark initiative and demonstrates the Government’s strong commitment to building a domestic rare-earth magnet ecosystem,” Nexon Geochem told Firstpost.
More from BusinessThe company said the reported extensions to the bidding timeline should not be viewed as a setback, but as an effort to encourage broader industry participation and attract more qualified bidders.
The bigger concern, however, lies upstream.
“The key commercial challenge remains long-term access to critical raw materials, particularly heavy rare earth elements such as dysprosium and terbium, which are essential for manufacturing high-performance magnets for EVs, defence and aerospace applications,” Nexon said.
While the government scheme supports investments in manufacturing, the company believes its long-term success will depend on securing reliable supplies of both light and heavy rare-earth feedstock, alongside policy continuity and visibility on future demand.
Why rare earths matter
Rare-earth magnets are among the strongest permanent magnets in the world and are indispensable for modern industry.
They are used in electric vehicle motors, wind turbines, robotics, missiles, aircraft, smartphones, medical devices and advanced defence systems. Any disruption in their supply can quickly ripple through multiple industries.
China currently accounts for around 90 per cent of global rare-earth magnet processing capacity, giving it enormous influence over one of the world’s most strategic supply chains. Beijing’s export restrictions introduced earlier this year disrupted production plans for automakers across several countries, including India, before supplies gradually began to recover.
The episode has prompted governments from Washington to New Delhi to accelerate efforts to diversify supply chains for critical minerals.
More than just manufacturing
Nexon Geochem, which has partnered with Russia’s Giredmet for technology support, said the collaboration is intended to help India build long-term domestic capability rather than remain dependent on imported expertise.
“Our objective is not simply to import technology but to accelerate India’s capability-building by combining international know-how with indigenous engineering, manufacturing and R&D,” the company said.
The company plans to progressively localise manufacturing, develop Indian engineering talent and create intellectual property within the country over time.
A long road to self-reliance
Industry executives acknowledge that India’s first generation of rare-earth magnet plants will continue to rely on some imported inputs.
Certain rare-earth oxides, specialised alloys and manufacturing equipment are likely to be sourced internationally until India’s upstream ecosystem matures.
“The objective of the scheme is to establish an integrated domestic rare-earth permanent magnet ecosystem rather than standalone manufacturing facilities,” the company said.
It estimates that if all selected projects under the government scheme are implemented successfully, India could meet around 50-60 per cent of its domestic demand for rare-earth magnets during the initial years.
As production scales up and domestic refining and alloy-making capacities develop, the country could eventually manufacture nearly all of its domestic requirement, significantly reducing its reliance on imports.
Recycling could become a strategic advantage
Building a resilient supply chain will require more than new factories.
The company believes recycling will play an increasingly important role as electric vehicles, wind turbines and electronic waste become valuable secondary sources of rare-earth materials.
India already has a head start through state-run IREL, which has built inventories of rare-earth oxides while expanding domestic processing capabilities.
Going forward, Nexon Geochem said the most resilient strategy would combine strategic reserves with domestic refining, alloy production, magnet manufacturing and recycling.
Such an integrated “mine-to-magnet” ecosystem, industry executives argue, would not only strengthen India’s manufacturing base but also reduce its vulnerability to geopolitical shocks in one of the world’s most strategically important supply chains.
