Mounting tensions between China and the United States are seemingly making automakers in the West try to reduce their reliance on permanent magnets – a key driver of the electric vehicle revolution, that power electric engines.
Most are made of rare earth metals from China.
The metals in the magnets are actually abundant, but can be dirty and difficult to produce.
China has grown to dominate production, and with demand for the magnets on the rise for all forms of renewable energy, analysts say a genuine shortage may lie ahead.
Some auto firms have been looking to replace rare earths for years. Now manufacturers amounting to nearly half global sales say they are limiting their use, a Reuters analysis found.
Automakers in the West say they are concerned not just about securing supply, but also by huge price swings, and environmental damage in the supply chain.
This means managing the risk that scrapping the metals could shorten the distance a vehicle can travel between charges. Without a solution to that, the range anxiety that has long hampered the industry would increase, so access to the metals may become a competitive edge.
Rare earth magnets, mostly made of neodymium, are widely seen as the most efficient way to power electric vehicles (EVs). China controls 90% of their supply.
Prices of neodymium oxide more than doubled during a nine-month rally last year and are still up 90%; the U.S. Department of Commerce said in June it is considering an investigation into the national security impact of neodymium magnet imports.
Companies trying to cut their use include Japan’s third-largest carmaker Nissan Motor Co, which told Reuters it is scrapping rare earths from the engine of its new Ariya model.
Germany’s BMW AG did the same for its iX3 electric SUV this year, and the world’s two biggest automakers Toyota Motor Corp of Japan and Volkswagen AG of Germany have told Reuters they are also cutting back on the minerals.
Rare earths are critical for the electronics, defence and renewable energy industries. Because some can generate a constant magnetic force, the magnets they make are known as permanent magnets.
Electric cars with these require less battery power than those with ordinary magnets, so vehicles can go longer distances before recharging. They were the no-brainer choice for EV motors until about 2010 when China threatened to cut rare earth supply during a dispute with Japan. Prices boomed.
Now, supply concerns are opening a divide between Chinese EV producers and their Western rivals.
While automakers in the West are cutting down, the Chinese are still churning out vehicles using the permanent magnets. A Chinese rare earths industry official told Reuters that if geopolitical risks are set aside, China’s capacity can “fully meet the needs of the world’s automotive industry.”
Altogether, based on sales data from JATO Dynamics, manufacturers accounting for 46% of total light vehicle sales in 2020 have said they have scrapped, plan to eliminate, or are scaling down rare earths in electric vehicles.
And new ventures are springing up to develop electric motors without the metals, or to boost recycling of the magnets used in existing vehicles.
BMW says it has redesigned its EV technology to make up for a lack of rare earths; Renault SA has slotted its rare-earth-free Zoe model into a growing niche of small urban cars that do not need extended driving ranges.
Tesla Inc, the U.S. EV giant whose $621 billion market value is just below that of the top five automakers combined – is opting for both types of motors.