The third crisis in the automotive industry

Over the past five years, the automotive industry has faced two major crises that have exposed its vulnerability to global supply chains. The first blow came in 2020, when the COVID-19 pandemic caused a massive shutdown of production worldwide. This was followed by the chip crisis in 2021, when a shortage of semiconductors caused production outages and delivery delays. Both crises showed how heavily the entire sector depends on the smooth flow of global materials and parts.

In 2025, a third crisis is coming, this time linked to a shortage of rare earth metals, which are key to the production of electric vehicles. China, which dominates the mining and production of these metals, has restricted their export, causing panic among car manufacturers. For example, German magnet manufacturer Magnosphere said that carmakers are willing to pay any price to secure the necessary materials. The European Association of Automotive Suppliers (CLEPA) reported that some European car parts manufacturers have already suspended production due to the slow approval of export licences by the Chinese authorities.

Car manufacturers are trying to reduce their dependence on China by seeking alternative sources of rare earth metals or developing magnets that do not require these metals. For example, the American company Niron is developing magnets without the use of rare earths and plans to build a $1 billion factory, which is expected to start production in 2029. However, these initiatives will take years to provide car manufacturers with the necessary quantities of materials. At the same time, it is essential that governments and industry work more closely together on long-term strategies for securing raw materials and investing in sustainable technologies.

This series of crises shows how deep the systemic problems with supply chains are in the automotive industry. The concentration of production of key components and raw materials in a few geographical areas increases the risk of sudden supply disruptions due to geopolitical or economic pressures. The automotive industry cannot rely solely on short-term solutions, but must rethink its entire supply model, invest in domestic resources and technologies that do not rely on rare earths, and build more resilient and flexible production networks. Without these changes, there is a risk that similar crises will recur, threatening both manufacturers and customers around the world.