Several European automotive component manufacturers have halted production following supply disruptions triggered by China’s restrictions on rare earth exports.
The move, first announced in April, is now being felt across Europe’s manufacturing sector, with suppliers reporting delays, shutdowns, and a lack of clarity on licensing procedures.
BMW confirmed on Wednesday that its supplier network had been affected by the shortages, although its own production lines continue to operate normally. The company, which has invested in rare earth-free motor technologies, nonetheless remains dependent on the restricted materials for smaller components.
The European Association of Automotive Suppliers (CLEPA) stated that multiple production lines across the continent have ceased operations as inventories dwindle. The association warned that, unless the situation improves, further disruptions are likely within the next month.
China accounts for approximately 90% of global rare earth production. These critical minerals are essential for the manufacture of electric motors, semiconductors, aerospace equipment, and military hardware. In the automotive sector, they are particularly important for electric vehicles and high-performance components.
Since early April, suppliers have submitted hundreds of export licence requests to Chinese authorities. According to CLEPA, only around 25% of these have been approved, while many others were rejected on what the association described as “highly procedural grounds”. CLEPA noted inconsistencies in licensing procedures between provinces, and said that some applicants had been asked to submit intellectual property-sensitive data as part of the process.
The export restrictions form part of a wider set of measures by Beijing announced in response to renewed tariffs imposed by the administration of U.S. President Donald Trump. Although framed as retaliation against U.S. policy, the curbs have global effect, impacting European, Indian, and other international manufacturers.
The German Electrical and Digital Industry Association (ZVEI) reported that some companies have only enough rare earth materials to last a few weeks.
Major global manufacturers including General Motors, ZF, and BorgWarner have sought to reduce their dependence on Chinese rare earths by developing new technologies. BMW, for example, has deployed magnet-free motors in its latest electric vehicle range. Yet many smaller systems, such as power window motors and wiper units, still rely on rare earths, limiting the effectiveness of such initiatives in the short term.
Volkswagen stated that it had received assurances that a small number of licences had been issued to its subcontractors in China. The company added that, for the time being, it had not experienced shortages.
The issue has now become a focal point in the broader U.S.–China trade dispute. President Trump has sharply criticised China’s restrictions, arguing that they represent a breach of a recent agreement between the two countries aimed at reducing tariffs and restoring market stability.
In recent weeks, the Trump administration imposed tariffs of up to 145% on a wide range of Chinese imports. Following a sharp decline in U.S. financial markets, the measures were partially scaled back, but Beijing responded with countermeasures, including the tightening of export controls on critical minerals.
Trump and Chinese President Xi Jinping are expected to speak later this week, with the rare earth restrictions high on the agenda. In a social media post on Wednesday, Trump described Xi as “VERY TOUGH, AND EXTREMELY HARD TO MAKE A DEAL WITH”, highlighting the fragile nature of recent negotiations.
Meanwhile, European policymakers are under growing pressure from industry groups to respond. Manufacturers are lobbying national governments and the European Commission to accelerate efforts to diversify supply chains and secure alternative sources of rare earths, either through recycling, domestic extraction, or strategic partnerships with non-Chinese producers.
The current shortages underscore Europe’s dependence on China for strategic raw materials and the vulnerability of its industrial base to geopolitical developments. With little indication that Chinese export policy will be relaxed in the near term, the risk of continued disruption to the automotive supply chain remains high.
