Facing China's strengthened rare earth export control, several global automobile manufacturers are seeking alternative solutions to avoid production interruption, including shifting part of their production to China or changing technology.
According to reports from Wall Street Journal and other foreign media, insiders revealed that multiple traditional and electric vehicle manufacturers and their suppliers are considering moving the production of some car parts to China to avoid the impending factory shutdown crisis.
The solutions currently being evaluated by US manufacturers include producing electric motors in Chinese factories or sending American-made motors to China to install magnets. Insiders stated that such a practice of transferring part of the production to China might become a feasible strategy to circumvent export controls, as the restrictions are only on the magnets themselves and do not cover the finished parts.
If automakers ultimately decide to transfer some of their production to China, it would result in a highly ironic outcome under Trump's goal of “bringing manufacturing back to America” by starting a trade war.
Following Trump's proposal of “reciprocal tariffs,” China tightened its export controls on various critical minerals and magnets in April. Foreign media reported that global automobile manufacturers are complaining that China's export restrictions on these rare earths could lead to production delays and factory shutdowns in the automotive industry.
Since April, China has required companies to apply for permits to export magnets made from rare earth metals, including dysprosium and terbium. China controls about 90% of the global supply of these rare earth elements, which are key materials that keep magnets stable at high temperatures. A wide range of modern technology products, from smartphones to F-35 fighter jets, rely on these magnets to operate.
In May, an industry group representing most major automobile manufacturers and component suppliers sent a letter to the Trump administration warning that if more rare earth parts cannot be obtained, car production could be reduced or even halted in the short term.
Transporting an unfinished part to the other end of the world to install a magnet the size of a chewing gum undoubtedly increases manufacturing costs and time, but several automobile manufacturers believe this might be the only option to avoid the partial shutdown of production lines. Although such an operation might expose the car manufacturers to additional tariff risks, industry executives generally believe that compared to halting production, this is a “lesser cost.”