China's Rare Earth Export Restrictions Disrupt Global Auto Industry
Ford Temporarily Halts Production Due to Supply Shortages
Alternative Supply Chains Sought as Concerns Grow Over Prolonged Blockade
The Nikkei reported on June 5 that China's rare earth export restrictions, implemented in response to its trade war with the United States, have begun to seriously impact global automobile production. If China's rare earth "blockade" continues for an extended period, it is expected that factory and production line shutdowns among parts suppliers and automakers will become unavoidable.
According to the Nikkei, Ford temporarily halted production of its Explorer SUV at its Chicago plant in Illinois at the end of May, resuming operations in June. The production stoppage was caused by supply disruptions of parts containing rare earth elements.
China is restricting rare earth exports as a means to gain leverage in trade negotiations. Rare earths are essential resources for key components such as electric vehicle (EV) and hybrid vehicle (HV) motors, and China accounts for about 70% of global production.
In April, as a retaliatory measure against high U.S. tariffs, the Chinese government imposed export restrictions on seven types of rare earths. As a result, export permits have been delayed, causing disruptions in production for parts suppliers, the Nikkei reported.
On June 4, Ford Chief Financial Officer (CFO) Cathy House stated at an investor event, "Since Chinese rare earths must pass through export controls, administrative procedures have become even more complicated," adding, "If the situation is prolonged, we will have to seek alternative parts or new procurement solutions."
The impact of China's rare earth export restrictions is spreading beyond the United States to Europe as well. On June 4, the European Association of Automotive Suppliers (CLEPA) announced, "Due to China's export restrictions, some European parts manufacturers have halted factory operations." However, the names of the affected companies were not disclosed.
According to CLEPA, since China began implementing export restrictions in April, European parts suppliers have applied for hundreds of export permits, but only about 25% of these have been approved. The association warned, "If this situation continues, further shutdowns of factories and production lines will be unavoidable."
U.S. consulting firm AlixPartners also projected that "if China does not resume export permit approvals soon, inventories of rare earth-related parts held by Tier 1 suppliers in Europe and the United States could be depleted by mid-June."
Japanese automakers are also on alert. On May 9, the Alliance for Automotive Innovation (AAI), which includes Toyota and Nissan, together with the Motor & Equipment Manufacturers Association, sent a letter to the Trump administration expressing concern that "without a response from the U.S. government, automobile production could halt within weeks."
Currently, U.S. plants operated by Japanese automakers such as Toyota and Honda are running normally, but there are growing expectations that production disruptions will be difficult to avoid if rare earth export restrictions are prolonged. Honda's U.S. subsidiary stated, "We are continuing discussions with parts manufacturers that use rare earths to secure inventory."
Meanwhile, countries are accelerating efforts to establish alternative supply chains in response to China's rare earth "blockade." On June 3, Reuters reported that U.S. President Donald Trump is proceeding with procedures to invoke emergency presidential powers on the grounds of national security to promote domestic production of strategic minerals, including rare earths.
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