Rare Earth Shortages from China Threaten German Car Manufacturing, Warns VDA
VDA Warns of Potential Production Decrease
FB Twitter Whatsapp Email Print Copy Link
The VDA automotive association is sounding the alarm over China's restraints on exporting rare earths, a move that could soon result in production delays and halts within the German automobile sector. These export restrictions are posing a significant threat to supply chains, asserted Hildegard Müller, the VDA President, in an interview with Reuters on Tuesday.
Currently, China isn't issuing sufficient export licenses, and the pace of customs clearance for approved licenses leaves much to be desired. If the situation doesn't improve soon, production delays and potential stoppages can't be ruled out. The Alliance for Automotive Innovation in the US had earlier issued a warning on May 9th about the threat of production disruptions due to this issue.
The VDA implores the German government and EU Commission to take immediate action, advocating for urgent discussions with the Chinese government in Beijing. The restrictions pertain to essential raw materials used in the production of electric motor magnets and sensors, with China being the world's leading supplier. Chinese companies must seek new licenses for each contract with foreign entities. The measures primarily target the US but affect all global customers.
The Effects on Global Automotive Production
Global Storm in the Automotive Sector
- Supply chain havoc: The new licensing procedures and long approval periods have resulted in severe supply shortages, causing some European manufacturers to halt production and destabilizing global automotive supply chains[1][2].
- Heightened costs and postponements: Facing sourcing obstacles and delays in obtaining rare earths, manufacturers are undergoing increased expenses, which are vital for producing electric vehicles and advanced automotive technologies[1][2].
- International fallout: Diplomatic and sectoral pressure is mounting, with delegations from Japan, Europe, and India urging Chinese authorities to expedite export license approvals[1].
- Dangerous spillovers: Apart from the automotive sector, the impacts extend to defense and energy, where rare earths play a pivotal role in specialized applications[1].
Potential Paths Forward
- Geographical Diversification: Encouraging reduction of reliance on China, countries and firms are being urged to develop alternative sources of rare earths, such as mining and refining projects in other regions[1][2].
- Recycling and City Mining: By investing in the recycling of rare earths from old electronics and automotive components, supply shortages can be mitigated[1].
- Technological Evolution: Investment in research for alternative materials or new manufacturing methods that don’t demand rare earths can help reduce dependency on these critically important resources[1].
- International Cooperation: Collaboration between governments and industry bodies for joint ventures and trade agreements is crucial for ensuring stable supplies and distributing risk associated with resource dependency[1][2].
- Strategic Stockpiling: Negotiation and construction of national or corporate stockpiles of critical rare earth elements can offer protection against future interruptions[1].
A summary table outlining the impacts and potential solutions can be found below:
| Impact/Challenge | Potential Solution ||---------------------------------|-------------------------------------------|| Supply chain disruption | Diversify supply sources || Increased costs and delays | Invest in recycling and urban mining || Production halts (esp. in EU) | Develop alternative materials/tech || Political/export license delays | International collaboration/stockpiling |
China’s export restrictions have brought forth the vulnerabilities of global supply chains and necessitated an immediate response from the international community and industry[1][2][3].
- The global automotive industry, including the European sector, is facing challenges due to China's export restrictions on rare earths, which are essential for producing electric motor magnets and sensors.
- In light of these supply chain disruptions and production halts, it is crucial for the international community and industry to collaborate, diversify supply sources, and invest in recycling and urban mining to mitigate the impacts.
- To ensure stability in supplies and manage the risks associated with resource dependency, strategic stockpiling of critical rare earth elements and international negotiations for joint ventures and trade agreements are also necessary.
