Automakers Race to Find Workaround to China's Stranglehold on Rare-Earth Magnets

Ideas under review include producing electric motors in Chinese factories or shipping made-in-America motors to China to have magnets installed

- Sean McLain & Ryan Felton

Our major automakers are racing to find workarounds to China's stranglehold on rare-earth magnets, which they fear could force them to shut down some car production within weeks.

Several traditional and electric-vehicle makers—and their suppliers—are considering shifting some auto-parts manufacturing to China to avoid looming factory shutdowns, people familiar with the situation said.

Ideas under review include producing electric motors in Chinese factories or shipping made-in-America motors to China to have magnets installed. Moving production to China as a way to get around the export controls on rare-earth magnets could work because the restrictions only cover magnets, not finished parts, the people said.

If automakers end up shifting some production to China, it would amount to a remarkable outcome from a trade war initiated by President Trump with the intention of bringing manufacturing back to the U.S.

"If you want to export a magnet [from China] they won't let you do that. If you can demonstrate that the magnet is in a motor in China, you can do that," said a supply-chain manager at one of the carmakers.

China in April began requiring companies to apply for permission to export magnets made with rare-earth metals, including dysprosium and terbium. The country controls roughly 90% of the world's supply of these elements, which help magnets to operate at high temperatures. Much of the world's modern technology, from smartphones to F-35 jet fighters, rely on these magnets.

In the auto industry, rare-earths are what allow electric-vehicle motors to function at high speed. They are also used in less exotic, though no less critical, functions from windshield wipers and headlights.