Rare-earth shortages to limit vehicle production

VEHICLE and component manufacturers the world over are scrambling to find alternative sources of magnets as China tightens its export controls over rare-earth materials crucial to their production.

Industry experts warn the rare-earths situation could evolve to become more substantial than the semi-conductor shortage that wiped millions of cars from production forecasts between 2021 and 2023, and of the coronavirus pandemic than closed factories for weeks in 2020.

According to reports from the United States and Europe, automotive manufacturers are prioritising back-up supplies for key components and re-examining the use of just-in-time inventories as the situation intensifies, with Automotive News stating, “the fate of automakers’ assembly lines has been left to a small team of Chinese bureaucrats”.

China controls up to 70 per cent of global rare-earth mining, 85 per cent of refining capacity, and around 90 per cent of rare-earth metal alloys and magnet production and has kerbed supply amid an ongoing trade war with the United States.

The average electric vehicle uses around 500g of rare-earth elements and the average ICE vehicle half that, the components found in electric motors, oil pumps, speakers, and a range of sensors and solenoids.

As was the case during the semiconductor shortage, it is forecast the constraints on rare-earths could force vehicle manufacturers to build vehicles without certain components and park them until such time as those parts become available.

According to Telemetry vice president of market research Sam Abeulsamid, imminent supply shutdowns will create bottlenecks in vehicle production that will be even worse than during the semiconductor shortage.

“You’re going to find things at least partially comprised of rare-earth metals in not just vehicles, but almost all consumer products,” he said.

“So many components rely on them – solenoids for your engine, solenoids for your power steering. If we can’t get rare earth metals, then we’re in big, big trouble.”

Mr Abeulsamid’s comments were supported by Ford Motor Company chief financial officer Sherry House, who told Automotive News that rare-earth materials and components were taking longer than usual to pass through China’s approval process, forcing it to idle its Chicago Assembly plant for a week because of a lack of rare-earth metals used to make brake boosters.

“You have to look for alternative parts or alternative ways to get things,” she said.

“Most frequently, it (the rare-earth approval) goes through. It just may take more time. So, then you might be facing expedited shipment costs that you weren’t anticipating, and it just puts stress on a system that’s highly organised, with parts being ordered many weeks in advance.

“It continues to be an issue, and we continue to work the issue.”

According to the Chinese Bureau of Industrial Security and Import and Export Control (part of China’s Ministry of Commerce), the export permit approval process relies upon just three senior officials – all with limited working hours – tasked with approving export permits.

Mathias Miedreich, the head of electrified powertrain technology at German automotive component giant ZF said the rare-earths issue could cause new-vehicle production to drop in the second half of the year, saying component shortages pose a “real risk” to production stability.

“There are so many magnets and rare earths in vehicles that, just statistically, there will be one or the other component that will not be able to be shipped, so the car cannot be built,” he said.

“It is a real risk.”