Highlights

• VDA warns that China's rare earth export restrictions could disrupt or halt German car production
• Major automotive manufacturers like Mercedes-Benz and Volkswagen remain passive in addressing supply chain risks
• Europe's automotive sector reveals its structural dependency on Chinese rare earth magnet supplies

Germany’s automotive lobby Verbandes der Automobilindustrie (opens in a new tab) (VDA) issued its strongest warning yet, stating that China’s rare earth export curbs could disrupt—or halt—car production. The statement, reported by Reuters, highlights Europe’s deep exposure to China’s stranglehold over rare earth magnets, but stops short of offering any actionable solution or industrial roadmap.

VDA President Hildegard Mueller (opens in a new tab) confirmed that permits issued by Beijing have not been sufficient to sustain German production, despite limited approvals for Volkswagen-linked suppliers. Key components, such as windshield motor magnets and brake sensors, are at risk. The situation is “critical,” Mueller said, with “production outages” now on the table.

Yet the messaging lacks detail, urgency, and accountability. Major OEMs, such as Mercedes-Benz, admit they are “monitoring the situation,” but have made no public moves to onshore or diversify magnet sourcing. Bosch, the world’s top auto supplier, has flagged supply chain problems since May but offered no update. Volkswagen has remained silent.

Worse, VDA’s messaging is reactive, not strategic. There is no mention of long-term diversification into domestic or allied rare earth processing, nor of partnerships with emerging “ex-China” magnet suppliers in the U.S., Australia, or Canada. The industry is still treating this as a diplomatic issue, not the structural crisis it is.

What’s Next?

Germany’s auto industry has built its EV future on a foundation dependent on China. The warnings are now loud, but they arrive without solutions. For investors, this highlights both the fragility of the Western auto sector and the urgency for companies with credible, scalable, ex-China rare earth magnet capacity. Europe’s manufacturing engine may be slowing, and Beijing still holds the key to its future.

Discuss this and other topics at the Rare Earth Exchanges Forum (opens in a new tab).