A severe shortage of rare-earth elements is emerging, threatening the auto industry and global economy. The critical minerals, used in everything from car engines to smartphones, are in high demand due to China’s monopoly on production.
China’s recent introduction of a new licensing requirement has slowed exports to most countries, including the US, leaving companies with only two or three months’ worth of supply. Without an agreement between the US and China, manufacturers will struggle to maintain production levels, potentially leading to widespread shutdowns.
The auto industry is likened to a “chip shortage on steroids” due to the widespread use of rare-earth elements. Car prices could surge again, as seen during the pandemic-era chip shortage that drove record prices in 2020. Companies such as Ford and General Motors have received temporary export licenses for rare earths, but these will expire soon.
Experts warn that finding reliable replacements is challenging, with alternatives often coming at the cost of performance. To avoid disruptions, an agreement between China and the US is essential to restore normal supply chains. However, more should have been done to prepare for this scenario in advance, according to critical minerals experts.
The situation highlights the complexities of global trade negotiations and the risks associated with relying on a single supplier like China. The auto industry’s reliance on rare-earth elements poses significant challenges, and addressing these shortages will require swift action from governments and manufacturers alike.
Source: https://edition.cnn.com/2025/06/10/business/rare-earths-shortage-impact