India’s rare earth push must go beyond magnets to build a China-independent supply chain

As countries seek to secure supply chains for EVs, RE and advanced manufacturing, access to rare earth materials is becoming a source of economic and geopolitical advantage. Demand for rare earth permanent magnets (REPMs) in India is expected to grow from 4,900 MT in 2025 to 12,500 MT by 2030, CAGR of 21%.

This surge will be driven primarily by EV motors, room ACs and wind turbines. Electric 4-wheelers and 2-wheelers require around 2 kg and 0.5 kg of magnets, respectively, for their traction motors. EV penetration is expected to rise from 6% in 2025 to 30% by 2030 for 2-wheelers, and from 3% to 15% for 4-wheelers. Magnet demand from these two segments alone is projected to increase from less than 1,000 MT today to about 3,500 MT by 2030, making them the largest drivers of future demand.

Yet, the supply chain remains dependent on China, which dominates every stage of the value chain. Globally, countries are accelerating efforts to build China-independent rare earth supply chains. The US is investing in an integrated mine-to-magnet ecosystem through MP Materials and USA Rare Earth. Australia is expanding separation and processing capacity led by Lynas, while Japan has secured long- term supplies through strategic investments and offtake partnerships.


GoI's REPM incentive scheme, which provides up to ₹150 cr in capex support and sales incentives of up to $23 a   kg, is a timely intervention. It can improve project viability, strengthen investment economics and encourage private participation in domestic manufacturing.

The support is particularly important because Indian REPM manufacturers are expected to face a cost disadvantage compared with Chinese competitors, who benefit from cheaper domestically sourced neodymium-praseodymium (NdPr), larger manufacturing scale, and higher operating efficiencies.

But magnet manufacturing should be viewed as a starting point, not the end goal. A domestic magnet industry can provide the foundation for a broader ecosystem. But long-term competitiveness will require deeper integration across the value chain.

A significant share of magnet demand in sectors like EVs is embedded within imported motors and assemblies, estimated at 60-65%. India must accelerate localisation not only of magnets but also of motors and downstream components. Although several domestic motor manufacturers are expanding capacity, localisation remains constrained by continued dependence on imported sub-assemblies.

The larger challenge lies upstream. True rare earth independence will depend on securing reliable access to feedstock such as NdPr oxide, and other critical rare earth materials. India possesses an estimated 13 MT of monazite resources, most of them located along the eastern coast. Yet, commercial participation remains limited.

Consequently, domestic manufacturers will continue to rely on imported feedstock. IREL (India) Ltd is expected to supply only 20-25% of the feedstock required to localise 6,000 MT of magnet production by 2030, leaving manufacturers exposed to supply disruptions and price volatility.

Achieving long-term competitiveness will require scaled mining and separation capabilities that can supply domestic feedstock. This calls for a balanced policy framework. GoI should evaluate mechanisms that enable greater private participation in rare earth extraction and processing while retaining strategic oversight of critical resources such as thorium.

India can draw on models such as Australia, where operators of mineral sand mines and processing facilities must implement approved radiation management plans that comply with strict regulations governing radiation protection and radioactive waste management. A similar framework could unlock private capital, tech and execution capabilities, while safeguarding national interests.

Industry, too, has a crucial role to play. Building capabilities across mining, separation, refining and metal production requires substantial investment, technical expertise and years of operational learning. Success will depend on patient capital and a long-term commitment rather than expectations of quick returns.

With developed economies actively seeking to diversify critical mineral supply chains, India is well placed to emerge as a trusted alternative to China, supported by FTAs with major markets and deeper tech partnerships. In the near term, however, the priority must remain building resilient domestic capabilities before becoming a global supplier.

(The writers are partners, EY-Parthenon)