Germany’s auto industry faces a serious risk of production disruptions due to China’s new export restrictions on rare earth magnets, a key component used in many car parts, the German auto lobby group VDA warned Tuesday.
This is the first time VDA has said that German car output could be halted because of China’s export curbs. The group did not specify when such a halt might occur.
Rare earth magnets are essential for various vehicle functions, including windshield wiper motors and brake sensors. Hildegard Mueller, head of VDA, told Reuters that while China has granted some export permits to a few producers—including suppliers to Volkswagen—the amount is insufficient to guarantee smooth production.
“If the situation does not improve quickly, production delays or even stoppages cannot be ruled out,” Mueller said.
Robert Bosch, the world’s largest car supplier, acknowledged in May that the new export procedures have caused challenges but declined to provide further comments on Tuesday. Mercedes-Benz said it is closely monitoring the situation but has not yet seen any direct impact.
Volkswagen did not respond to requests for comment.
Some suppliers have canceled orders since the new export licensing rules started, due to uncertainty over whether they would receive permits, said Christian Grimmelt, a partner at consultancy Berylls by AlixPartners.
Diplomats and industry leaders from India, Japan, and Europe are urgently seeking talks with Chinese officials to speed up export approvals, sources told Reuters.
Experts believe China is using these export controls as a diplomatic tool, mainly in response to U.S. tariffs imposed under President Donald Trump. Since China controls about 90% of the global processing capacity for rare earth magnets, the impact is felt worldwide.
Trade groups in the U.S. and India, representing major automakers like General Motors, Toyota, Volkswagen, and Hyundai, warn that factories could shut down within weeks if suppliers cannot secure the rare earth materials they need.
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