German Car Production at Risk Due to Rare Earth Shortage: VDA Warns
Production concern arises within VDA due to potential drop.
German car manufacturing could encounter production delays or halts, according to the VDA automotive association, due to China's tightened export restrictions on essential rare earths. VDA President Hildegard Müller recently voiced her concerns to Reuters news agency, stating these restrictions pose a severe challenge to supply chain security.
Rare earth elements (REEs) like dysprosium, gadolinium, lutetium, samarium, scandium, terbium, and yttrium are indispensable for producing critical components in vehicles, including electric motors and braking systems. These elements are crucial for the production of electric vehicles (EVs) and hybrid vehicles, which are becoming increasingly significant in the automotive industry 2.
China, the world leader in REEs production, has slowed down shipments by issuing insufficient export licenses and a protracted customs clearance process for legitimate licenses. If the current situation does not improve soon, production delays and potential stoppages are inevitable, warns the VDA. In fact, the Alliance for Automotive Innovation in the United States had already issued a warning on May 9 regarding predicted production setbacks due to the same issue 5.
The VDA urges the German government and the EU Commission to raise this matter urgently with the Chinese government and work towards a resolution. China's introduction of these restrictions on vital raw materials, used in electric motor magnets and sensors, came amidst its ongoing trade disputes with the US 3. Chinese producers must secure new licenses for each contract with foreign companies, making them subject to this restriction that was primarily aimed at the US but indirectly impacts all global buyers.
Enrichment Data:
China's stranglehold on the REEs supply chain has far-reaching consequences. Not only does it pose a threat to German car manufacturing but also European auto suppliers have been forced to halt operations due to the lack of essential materials, with some halting production entirely 3. This predicament can be attributed to China's control over 60% of the world's REEs and 90% of global refining capacity, making it the dominant player in the supply chain 2. The geopolitical impetus behind these restrictions could be a reaction to US tariffs and trade tensions, leaving European industries caught in the line of fire, grappling with severe supply chain shortages and disruptions 3.
In essence, the dependence of German car manufacturers on REEs, coupled with China's control and the current export restrictions, jeopardizes production in the automotive sector.
Sources: ntv.de, RTS, 24
- The supply chain disruptions caused by China's tightened export restrictions on rare earths pose a significant challenge for small and medium-sized undertakings (SMSEs) in the German automotive industry.
- These restrictions also impact the manufacturing industry, as rare earth elements are crucial for producing critical components, such as electric motors and braking systems, which are essential for the production of electric vehicles.
- Furthermore, the energy sector and aerospace industry, which rely on SMSEs for various components, could be indirectly affected by these supply chain issues, as the shortage of rare earths may lead to production delays or halts in the automotive sector.
