European Carmakers and Auto Suppliers Warn of Operational Shock Amid Rare Earth Shortage, as U.S.-China Tensions Remain Elevated

Some European auto parts plants have suspended production, while German carmaker BMW warned that its supplier network has been affected by a shortage of rare earth elements, according to Reuters. These concerns are deepening as China's restrictions on critical mineral exports begin to take a toll on global manufacturing.

China’s April decision to suspend exports of a broad range of rare earths and related magnets has disrupted global supply chains critical to automakers, aerospace firms, semiconductor manufacturers, and defense contractors. Accounting for roughly 90% of global rare earth production, China’s move underscores its dominance in the critical minerals sector — essential to the green energy transition — and is widely viewed as strategic leverage in its escalating trade conflict with U.S. President Donald Trump.

On Wednesday, BMW confirmed that while some of its suppliers are experiencing rare earth shortages, its own manufacturing operations are still running normally. However, Europe’s auto supplier association CLEPA reported that several production lines across the continent have been shut down as a direct result of the shortages. The association also revealed that of the hundreds of export license requests submitted by suppliers since early April, only about a quarter have been approved, with some rejections made on what it called “highly procedural grounds.”

“Procedures seem to vary from province to province, and in several instances, IP-sensitive information has been requested,” CLEPA noted. Without a more streamlined process, the association warned that more plants are likely to be impacted in the next three to four weeks as inventories run dry.

Although the Chinese export curbs were announced alongside a broader package of retaliatory measures in response to Washington’s tariffs, the restrictions apply globally and have triggered alarm among business leaders across multiple industries. German and U.S. automakers have expressed concern that China's restrictions are threatening production, echoing similar complaints made by an Indian electric vehicle manufacturer last week.

In response, many companies are lobbying their respective governments for urgent intervention, while simultaneously scrambling to find alternative sources. Some firms, according to Wolfgang Weber, CEO of Germany’s electrical and digital industry association ZVEI, only have enough supplies to last a few weeks or months. “Companies currently feel abandoned by politicians and are partly looking for solutions to their difficult situation on their own in China,” he said in a statement.

Major automakers — including General Motors, BMW, ZF, and BorgWarner — are actively developing or researching motors with reduced or zero rare earth content to lessen reliance on China. However, few have managed to scale these innovations to the point where costs are competitive. BMW, for instance, has deployed magnet-free electric motors in its latest EV generation but still relies on rare earths for smaller motors used in components like windshield wipers and window rollers.

Volkswagen reported on Wednesday that it has seen no immediate shortages, noting that a limited number of Chinese export licenses have been granted to its subcontractors.

Meanwhile, trade relations between the world’s two largest economies remain tense. Although Washington and Beijing temporarily agreed to suspend more than 100% of their reciprocal tariffs for 90 days — a pause in effect through mid-August — both sides accuse each other of failing to uphold their commitments.

The U.S. continues to implement restrictions on advanced chip exports to China, prompting retaliatory measures from Beijing, including its continued enforcement of rare earth export controls — a major sticking point for U.S. negotiators.

President Trump and Chinese President Xi are expected to speak this week, according to a White House official, though Beijing has yet to confirm the meeting. The atmosphere remains uncertain. In a social media post on Wednesday, Trump wrote that Xi is “VERY TOUGH, AND EXTREMELY HARD TO MAKE A DEAL WITH,” emphasizing the fragile nature of any potential breakthrough.