Why Tesla, GM, and Rivian will be hurt most by China’s critical minerals export ban
China’s suspension of critical rare earth minerals exports to the US could become a major headache for US companies, particularly automakers like Tesla (TSLA), GM (GM), and Rivian (RIVN).
Per the New York Times and Reuters, China ordered restrictions on exports of six rare earth metals that are only refined within the country on April 4. The metals, along with rare earth magnets, are used in everything from autos to aerospace products, with rare earth metals in particular used in magnets for EV motors. The suspension comes after President Trump ratcheted up his trade war with China with enhanced tariffs on April 2.
Many of the metal shipments are stuck at ports in China, awaiting new instructions from the Chinese government on the special export permit process needed to ship the materials out. Currently no guidance is in place, per the reports.
China produces 99% of the world’s supply of rare earth minerals and 90% of the rare earth magnets.
“It is important to be aware that there is a big difference between China requiring export licenses as compared to a ban on exports. China has announced export license requirements on critical minerals before but in many cases there weren’t any actual signs of declining import volumes,” countered Daniel Pickard, chair of the International Trade practice at Buchanan Ingersoll & Rooney PC, to Yahoo Finance. Pickard is also chair of the critical minerals advisory committee for the Office of the US Trade Representative.
Pickard also believes China’s move is more of a “political message” and that exports may not actually decrease.
The Alliance for Automotive Innovation, which represents several automakers on trade and industry-related issues, did not immediately respond for comment.
“China’s ban on rare earth exports to the US slows access to a number of minerals crucial to modern vehicle production,” said manufacturing expert Sam Fiorani of AutoForecast Solutions to Yahoo Finance. “Minerals such as yttrium and dysprosium are important for electric vehicle manufacturing as key ingredients for batteries and motors. Other minerals could slow production of smaller motors, speakers, camera lenses, and LEDs,” which are used in auto production as well.
Reuters reported that several Chinese rare earth sellers have declared force majeure (a legal term that means “superior force”) on their contracts with overseas buyers, meaning they claim they cannot fulfill their commitments due to forces outside their control.
Top US EV manufacturers like Tesla, GM, Rivian, and Ford (F) are deeply exposed, as they assemble many motors for their vehicles in the US. Conversely, rivals like European, Japanese, and, to a lesser extent, Chinese manufacturers will benefit from their access to these important resources only available from China.
