Rare Earth Elements Essential for Auto Parts Manufacturing, Blocked by China
Disruption in Parts Supply Impacts Finished Vehicle Production
Similar Cases Emerging in the US and Europe
On June 5, the Japanese business daily Nihon Keizai Shimbun (Nikkei) reported that Suzuki, the Japanese automobile manufacturer, had confirmed the suspension of production for all models of its compact car 'Swift' due to China's export restrictions on rare earth elements.
Previously, starting from May 26 until June 6, Suzuki had halted production of all Swift models manufactured in Japan except for a few specific variants. However, the company had remained silent about the exact reason for the suspension.
Recently, Suzuki reportedly informed its suppliers that the production halt was due to China's restrictions on rare earth exports. This development is seen as a tangible disruption to the supply chain, following China's move to block exports of critical resources like rare earth elements as a means of pressuring countries around the world.
China is estimated to account for 70% of global rare earth production. Amid an ongoing trade war with the United States, the Chinese government has, since April, imposed export restrictions on seven categories of products, including rare earth magnets, in retaliation for reciprocal tariff measures by the U.S.
Rare earth elements are essential for manufacturing key components of motors used in electric vehicles (EVs) and hybrid vehicles (HVs). Some Swift models are equipped with a simplified hybrid system to improve fuel efficiency, and these models have also been affected. Nikkei pointed out that Suzuki likely suspended production of all models because halting only the hybrid models would reduce manufacturing efficiency.
Cases of production suspensions due to rare earth shortages have also been observed in the United States and Europe. Ford, a symbol of the American automotive industry, reportedly temporarily halted production of its Explorer SUV at its Chicago plant at the end of last month.
The European Association of Automotive Suppliers announced that some parts manufacturers had suspended factory operations. According to foreign media, European auto parts companies have applied for hundreds of rare earth export permits from China since April, but the approval rate has been only 25%.
Meanwhile, Suzuki announced on this day that it would extend the production suspension until June 12 due to the prolonged shortage of parts. Although the plant was expected to resume normal operations from June 16, there remains a possibility of further suspensions if the parts shortage continues.
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