Why EV Manufacturing is Moving Away from Chinese Rare Earths

The electric vehicle (EV) industry has a high dependence on rare earth materials, which are largely produced and processed in China.

Trade restrictions imposed by the Chinese government, however, are prompting EV manufacturers to seek technological alternatives and diversify their sourcing strategies.

The move follows the introduction of a new licensing system by China for the export of these elements, adding complexity and uncertainty for manufacturers. This has direct implications for EV production, with research from IDTechEx finding that, in 2024, 87% of the global EV market used motors with rare earth magnets.

Supply chain disruption

Rare earth elements are a group of 17 metallic elements important for the high-powered magnets used in electric vehicle motors. China's dominance in this sector is substantial, overseeing 61% of global rare earth production and 90% of the processing.

The new licensing system for exports creates a more complex procurement process, affecting the global supply chain.

Most EV motors use neodymium magnets, which contain the rare earths dysprosium and terbium, both of which are covered by the export restrictions. Each of these motors can contain 1-3kg of these magnets.

In 2023, this reliance caused production delays and reductions for major automotive companies, including Ford and Suzuki Motor, highlighting the disruption that can stem from a dependency on a single supplier nation.

“We all got a wake-up call this year,” comments Barbara Humpton, CEO of USA Rare Earth. “There has been globalisation, which has driven so much manufacturing overseas. And when China decided that they would not be providing rare earth for the magnets to the US and our trading partners, that sent a shockwave through the system.”

While other regions are making investments in the mining and production of rare earths, establishing these operations requires considerable time and capital. In response, the motor industry is focusing on reducing the amount of rare earths in their products.

Engineering alternative motors

The reduction and elimination of rare earths are now a focus for electric motor manufacturers and EV OEMs. One approach is to improve the power density and efficiency of motors, which can lower the reliance on these materials.

Developing higher-speed motors could also reduce overall material consumption, as these motors can be smaller while delivering the same power output.

Companies such as Toyota, Nissan and Honda have already made progress in reducing their dependence on rare earths through advances in material engineering, including the tight control of impurities and the refining of grain structure.

Furthermore, the development of more effective thermal management systems could reduce the need for heavy rare earths, which are primarily used to prevent demagnetisation at high temperatures.

Viable commercial alternatives

The externally excited synchronous motor (EESM) presents a commercially viable alternative that is already in use by Renault, BMW and Nissan in some of their EV models. This motor design uses copper electromagnets on the rotor instead of rare-earth permanent magnets.

While the design is more complex because the rotor windings require a power source and its efficiency is lower than a permanent magnet motor, it is a cost-effective and practical option when access to rare earths is constrained.

Ferrite magnets are another substitute for rare earths. Although they are not as magnetic, meaning a larger volume is needed to achieve similar performance, they are abundant and widely available.

The increased size requirement presents design challenges for manufacturers, as the motor must be made considerably larger. Despite this, it remains a suitable option for certain vehicle segments.

Concurrently, companies are researching other magnetic materials. The goal is to identify a material with low cost and high availability that can be applied across various applications.

Through this exploration, concerns within the EV supply chain could be diminished, allowing manufacturers to diversify their material sourcing and limit their exposure to geopolitical trade shifts.