Bajaj Warns On Impact Of China Magnet Export Curbs On India's Auto Sector
India's vehicle production will take a hit as early as July if China doesn't resume shipments of rare earth magnets, Bajaj Auto Ltd. said on Thursday, underscoring the impact of the export curbs on the world's third largest automotive market.
“The rare earth situation is a difficult one,” Rakesh Sharma, executive director at the Chetak maker, said during a post-earnings conference call. “Supplies and stocks are depleting fast. If there's no relief (from the export curbs), production will be seriously impaired in July. That's the current case for the automobile industry.”
In April, China suspended the exports of critical rare earth elements, metals and magnets in response to US President Donald Trump's tariff war against Beijing. The move has crippled the supply chain for electronics to automobiles and aerospace.
China now requires importers to submit an application detailing the end-use of rare earth magnets, with assurance that the materials won't be used in military applications or routed to the US. The process must be initiated by the importer, then endorsed by China before a final clearance.
Indian companies have submitted 30 such applications, none of which have been approved so far, Sharma said. “There's a very onerous process we have hammered together, but the flow has simply not started.”
The supply of rare earth magnets is critical for Bajaj Auto, by way of its electric-vehicle business. The Chetak electric scooter uses a neodymium-based magnet in its motor. Any disruption here can cut the slim lead it has taken over rivals TVS Motor Co. Ltd. and Ola Electric Mobility Ltd., even as it chases profitability on an operational level.
On Thursday, Bajaj Auto shares rose 0.47% to Rs 8,890.00 apiece on the BSE even as the benchmark Sensex ended the day 0.39% higher at 81,633.02 points.
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