The European automotive sector is facing mounting pressure following China’s sweeping export restrictions on rare earth elements, which are critical to electric motors, high-tech components, and defense systems. Several parts suppliers have already suspended production, and major automakers like Mercedes-Benz and BMW are actively seeking ways to mitigate the risk of supply shortages.
China’s decision in April to halt exports of a wide array of rare earths and related magnets has sent shockwaves through global industries, underlining Beijing’s dominant position—it produces about 90% of global rare earths and nearly 100% of heavy rare earths. The restrictions, introduced as part of broader trade tensions with the U.S., apply globally and have upended tightly synchronized supply chains.
Mercedes-Benz production chief Joerg Burzer revealed that while its production remains unaffected for now, the company is working with suppliers to build “buffers” and stockpiles. Meanwhile, BMW confirmed supply disruptions within its supplier network, though its own production lines continue operating. Swedish airbag maker Autoliv and German electronics association ZVEI both confirmed the situation is under constant review, with task forces now in place.
According to CLEPA, Europe’s auto supplier association, only 25% of export license requests from suppliers have been approved by China, with many rejected on “highly procedural grounds.” The group warned that additional factory shutdowns are likely.
The issue is further complicating the already fragile geopolitical standoff between China and the U.S. President Donald Trump, who recently scaled back punitive tariffs following market turbulence, has accused China of violating recent truce terms. Chinese President Xi Jinping and Trump are expected to discuss the curbs in an upcoming call, with rare earths expected to top the agenda.
With few viable alternatives to Chinese supply in the short term, auto manufacturers are scrambling to innovate. BMW has introduced magnet-free electric motors, while ZF and BorgWarner are developing low- to zero rare earth models—but commercial scalability remains years away.
“There is no solution for the next three years except to come to an agreement with China,” said Andreas Kroll, managing director of Noble Elements, a rare earth importer.
As rare earth supplies dwindle and diplomatic tensions escalate, Western governments are under growing pressure to accelerate diversification efforts. Brussels has already identified 13 non-EU mining projects to help reduce critical mineral dependency, and the EU’s industrial strategy chief Stephane Séjourné emphasized the urgency: “The export curbs increase our will to diversify.”
