In early June 2025, Chinese authorities granted special export licenses to rare-earth suppliers linked to the top three U.S. automakers (GM, Ford, Stellantis). Reports say these licenses are temporary (valid for about six months) rather than permanent. This move followed Beijing’s April 4, 2025 announcement that it would require export permits for a broad range of medium- and heavy-rare-earth elements and related permanent magnets. The seven affected elements included samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium, key inputs for high-performance magnets. Electric vehicle (EV) motors use permanent magnets made from neodymium, praseodymium, dysprosium, and terbium, so in practice, the April controls (targeting heavy REEs and magnets) effectively covered the core rare earths needed for EV production.
Chinese officials framed the licensing as a technical process to “safeguard national security” and meet rising demand from robotics and EV sectors. A Commerce Ministry spokesperson emphasized that approved shipments were limited to “compliant applications” and aligned with international norms. In other words, Beijing positioned the licenses as meeting legitimate needs without ceding control. Observers note that making the licenses temporary (six months) underscores that this is a short-term relief rather than a permanent policy reversal. Analysts argue it serves as a calibrated concession to ease immediate pressures on automakers while preserving China’s long-term leverage (as Abigail Hunter of the Center for Critical Minerals Strategy warns, “the six-month extension… is not a reprieve, it’s a reminder” that U.S. supply chains remain vulnerable).
China’s decision must be viewed in the broader U.S.-China trade and technology rivalry. The April export controls were imposed amid an escalating trade war: they came in retaliation for new U.S. tariffs on Chinese goods. Rare earths are a strategic chokepoint: China controls roughly 90% of global processing capacity and virtually all heavy-REE refining. In effect, rare earths have become a bargaining chip. Following high-level talks in London on June 11, U.S. officials reported that China agreed “to resume exports of rare earth elements and magnets” to the United States. This suggests the temporary licenses were at least partly a gesture within a broader trade truce. Domestically, Beijing continues to insist it will strictly regulate exports “in line with laws and regulations” and fulfill its non-proliferation obligations, implying the controls will remain in force overall.
In summary, the temporary licenses appear to be a strategic move: enough to placate jittery supply chains and support Chinese exporters’ credibility in the short term, but explicitly limited in duration to retain China’s bargaining leverage. As CSIS analysts note, embedding rare-earth concessions in a trade pact underscores “the criticality of minerals to the U.S. economy” and China’s “severity of the chokehold” on supply. SAFE (a U.S. energy think tank) similarly observes that while the licenses offer short-term relief, they “underscore just how exposed” U.S. industry is to Chinese leverage.
All three automakers rely heavily on Chinese rare earth imports for their EV and hybrid vehicles. Permanent magnet motors (NdFeB magnets) used in many EV drivetrains and components are overwhelmingly supplied from China. (GM Ventures notes “roughly 90% of the rare-earth magnet supply is dependent upon China”.) With global EV content rising, any disruption in these imports poses major production risks. Indeed, Ford’s CEO Jim Farley reported the company is “hand-to-mouth” on magnet supplies, forcing production stops. Ford shut down its Explorer SUV line for a week in May due to a rare-earth shortage. Stellantis, for its part, said it had enough rare earths in hand to cover June but admitted it had spent “tough hours” securing supply. General Motors has likewise been scrambling (and even invested in alternative-magnet startup Niron to hedge future risks), though it publicly downplayed immediate production impacts.
In the short term, the Chinese licenses relieve acute bottlenecks and allow these automakers to resume normal output through mid-2025. But all warn that the risk remains if licenses lapse. Industry groups (MEMA and the Alliance for Automotive Innovation) wrote to U.S. officials that without reliable rare-earth access, “suppliers will be unable to produce critical automotive components, including automatic transmissions, alternators, various motors, sensors… and cameras”. Ford’s finance chief recently reiterated that these rare-earth issues “will continue” despite relief from the licenses. In other words, U.S. OEMs still face a hand-wringing, stop-and-go scenario.
Over the longer term, reliance on Chinese REEs clouds automakers’ EV plans. Delayed or reduced magnet supply can force line slowdowns or redesigns. For example, BMW has begun deploying a magnet-free electric motor in its new EVs (avoiding NdFeB magnets entirely), though it still needs rare-earth motors for smaller devices like wipers. Most other manufacturers have no immediate replacement: as one industry expert warned, “there is no solution for the next three years except to… agree with China” on rare earths. If the six-month licenses are not extended, automakers risk renewed shortages and potential production halts later in 2025. In that scenario, they may have to build vehicles without completing all components (akin to how cars were parked during the 2021 chip crisis) or accelerate investment in alternative motor technologies.
The global rare-earth supply chain is extremely concentrated and fragile. Mining occurs in a few places (notably China’s Bayan Obo mine and Australia’s Mt. Weld), but processing and magnet manufacturing are almost entirely in China. For context, China holds the vast majority of known REE reserves (≈44 million tonnes vs. much smaller amounts elsewhere) and controls ~85 90% of refining capacity. The adjacent map (sourced to USGS) illustrates China’s outsized REE reserves relative to other countries. Because of this centralization, any export curbs by Beijing reverberate worldwide.
(1) Separation/refining of mined ore into individual oxides (e.g., Neodymium oxide, Dysprosium oxide). Outside China, there are very few heavy-REE separation plants. For instance, until 2023, China accounted for 99% of heavy-REE processing; only one small facility in Vietnam operated (and it recently closed). The United States currently has no commercial heavy-REE separation capacity, a gap the Department of Defense is rushing to fill via funding. (DOE and DOD investments now aim to build a “mine-to-magnet” chain in the U.S. by 2027, but these will take years to mature.)
(2) Magnet production: Almost all neodymium-iron-boron (NdFeB) magnet manufacturing is done in China or allied East Asian facilities. Rare-earth alloys and magnets made in China are then shipped worldwide for assembly. U.S. companies like MP Materials mine Nd/Pr ore at Mountain Pass, but currently must sell most output to China for refining; MP only recently opened a modest magnet plant in Texas. Efforts are underway to diversify, for example, Lynas Corp (Australia) is building a rare-earth refinery in Texas, but foreign refining still lags.
(3) End-use component integration: Automakers’ complex supply chains mean magnets pass through many tiers of suppliers. The April export curbs immediately created red tape: European supplier group CLEPA warned that several production lines shut down due to a lack of magnets. Without reliable exports, companies may have to stockpile or redesign. For example, Mercedes-Benz reportedly is “talking to top suppliers about building buffers such as stockpiles” of magnets and components.
While alternative sources exist, they remain limited: Australia’s Lynas now exports large volumes of Nd/Pr oxides (from Mt. Weld) and has opened a Malaysian plant producing dysprosium and terbium. Canada and the U.S. have REE mining (e.g., US Rare Earths in Texas, NioCorp in Nebraska) but almost no downstream processing yet. Africa has heavy-REE projects (e.g., Shenghe’s planned acquisition of Tanzania’s Ngualla mine), which could help supply Dy/Tb in the future. However, no alternatives can replace Chinese output overnight. As Reuters notes, automakers worldwide are researching lower- or zero-REE motor designs, but “few have managed to scale production” and relieve reliance.
If the six-month licenses expire without renewal (i.e., late 2025), automakers could face a renewed supply shock. In the worst case, Chinese export curbs would snap back to their full April intensity: parts production in the U.S. and Europe could stall again (suppliers warned that inventories only last “a few weeks or months”). Some analysts liken this risk to the semiconductor shortage: Mercedes’ CTO and others have cautioned that extended REE constraints could “resemble the computer-chip shortage” that wiped out millions of vehicles. Automakers might be forced to park vehicles awaiting magnets (as happened with cars missing chips) or issue stopgap fixes.
To mitigate such a scenario, several strategies are under consideration:
If the licenses expire without further easing, U.S. and allied supply chains face significant disruption. The immediate effect would mirror the spring 2025 crisis: production delays and higher costs. Over a 1 2 year horizon, the stress would drive massive investment in new mines, plants, and R&D. The only fully secure outcome, analysts agree, is to build alternative supply chains domestically and with allies (a “complete mine-to-magnet” capability). Without that, China’s dominance in REEs remains a potent vulnerability in the EV and defense supply chain.