Who Controls the Materials Inside an Electric Vehicle

A week without a magnet

In May 2025 the Ford plant on Chicago's South Side stopped building the Explorer for a week. Reuters reported on 13 June 2025 that the shutdown came from a shortage of rare earth magnets, and that chief executive Jim Farley described Ford's supply as hand to mouth. The missing parts were small. A sintered magnet sits inside a motor, a pump or an actuator, and without it a vehicle cannot leave the line.

Ford was one of several. A Reuters factbox on 5 June 2025 recorded that Suzuki suspended production of its Swift subcompact from 26 May, citing a parts shortage that people familiar with the matter tied to Chinese restrictions. The day before, on 4 June 2025, the European auto suppliers' association CLEPA said the restrictions had already led to the shutdown of several production lines and plants across Europe, and that only about a quarter of the hundreds of export license applications filed since early April appeared to have been approved. Bosch, BMW and ZF all told Reuters that parts of their supplier networks were affected.

This issue follows the materials inside an electric vehicle back to the few places that refine them. We look at how China turned that position into a licensing system, how Washington and Brussels are answering, and how motor engineers are redesigning around the bottleneck. We close with a story from 1978 that shows how the magnet in today's traction motor was itself born from a supply shock.

A map with very few pins

The International Energy Agency publishes the most complete public picture of who refines what. In its commentary of 23 October 2025, the IEA said China's share of sintered permanent magnet production had risen from around 50% two decades ago to 94%. The same commentary put China at about 91% of global rare earth separation and refining, and found China was the leading refiner for 19 of 20 strategic minerals, with an average market share of 70%.

The battery tells a similar story. The IEA's Global Critical Minerals Outlook 2026, published on 16 July 2026, gives China 94% of refined graphite in 2025, and expects its share of battery-grade graphite supply to fall only to 91% over the next decade. China's share of lithium refining rose from 70% in 2024 to 75% in 2025, according to the same report. China also accounted for more than 75% of cobalt refining in 2025, a share the IEA expects to stay broadly unchanged through its projection period.

Mining is spread a little wider, though each mineral has its own capital. The USGS Mineral Commodity Summaries 2026 estimate world rare earth mine output at about 390,000 metric tons of rare earth oxide in 2025, with 270,000 metric tons from China, 51,000 from the United States, 29,000 from Australia and 22,000 from Burma. For cobalt, the USGS estimates the Democratic Republic of the Congo mined about 230,000 of the world's roughly 310,000 metric tons in 2025, about 73%, with Indonesia second at about 44,000 metric tons. In nickel, the IEA's 2026 Outlook says Indonesia now supplies almost two-thirds of mined output and just under half of refined output, and that in 2025 it shipped 75 kt of nickel matte, about a quarter of its supply, to China for further refining.

The IEA's summary statistic captures the direction of travel. Excluding rare earths, the average share held by the top refining country for key energy minerals rose to 72% in 2025, up from 70% in 2023, according to the 2026 Outlook. Rare earth refining was the exception, with new plants in Malaysia and the United States producing a modest decline in concentration between 2023 and 2025.

The license that paused the line

On 4 April 2025, China's Ministry of Commerce (MOFCOM) and the General Administration of Customs issued Announcement No. 18. It required case-by-case export licenses for seven medium and heavy rare earths, namely samarium, gadolinium, terbium, dysprosium, lutetium, scandium and yttrium, covering their metals, oxides, alloys, compounds and permanent magnet materials. The USGS Mineral Commodity Summaries 2026 records the same seven elements and notes that these April controls stayed in effect after the later suspension, with China issuing general licenses to selected exporters.

The choice of elements was precise. A US Department of Energy supply chain assessment from February 2022 explains that heavy rare earths such as dysprosium and terbium are added to sintered neodymium magnets to keep them from demagnetizing above about 120 degrees Celsius. A traction motor runs hot, so the magnets that matter most to carmakers depend on two of the seven licensed elements.

The trade data moved quickly. Chinese exports of rare earth permanent magnets fell to 1,238 metric tons in May 2025, down about 74% from a year earlier and about 53% from April, according to an analysis published by Shanghai Metals Market in June 2025. Prices split along the border as well. The IEA's October 2025 commentary reported that European rare earth prices at their peak reached up to six times those in China.

Shipments continued under license, and the USGS notes that China later began issuing general licenses to selected exporters. The lesson for operators lay in the mechanism. A license desk can slow a shipment by weeks without a formal ban, and a plant running on lean inventory feels a delay of weeks as a stoppage.

October 2025 and a dated pause

On 9 October 2025, MOFCOM issued a wider package of six announcements, Nos. 55, 56, 57, 58, 61 and 62. The IEA's commentary of 23 October 2025 summarized its reach: five more rare earths (holmium, erbium, thulium, europium and ytterbium) from 8 November, and controls on parts, components and assemblies from 1 December 2025 for products containing more than 0.1% by value of select Chinese-sourced materials. That last element borrowed the logic of the foreign direct product rule long used by the United States, extending Chinese licensing to goods made in other countries. The package also covered lithium battery and synthetic graphite anode materials and related equipment and technology.

After the Trump and Xi meeting in Busan on 30 October 2025, MOFCOM and the General Administration of Customs issued Announcement No. 70 of 2025 on 7 November 2025, which suspended all six October announcements until 10 November 2026, as reported by Xinhua and China Daily on 8 November 2025. The April 2025 licensing regime was left in place. The IEA's 2026 Outlook estimates that full implementation of the expanded rare earth controls could put USD 6.5 trillion per year of downstream production outside China at risk across automotive, high technology, defense and energy, and that a full disruption of battery-grade graphite trade would put over USD 300 billion per year at risk.

Here is what we can confirm as of 19 October 2026. On 28 September 2026, MOFCOM's Department of American and Oceanian Affairs said the two sides had agreed to extend the Kuala Lumpur joint arrangement of October 2025, under which each side suspended some tariff and non-tariff measures until 10 November 2026, to 10 January 2027, and the statement did not name rare earths or export controls. A FXStreet analysis on 14 October 2026 still treated 10 November 2026 as the expiry date for the rare earth suspension and described an extension to January as one scenario among several. A Bloomsbury Intelligence and Security Institute report of 30 September 2026 states that the suspension was extended to 10 January 2027, citing press coverage of the truce, and that no jointly documented settlement on critical minerals exists. We found no MOFCOM or customs announcement that amends Announcement No. 70 of 2025, which sets the 10 November 2026 end date, so we treat that date as live until one appears.

Washington takes equity

The United States answered with its balance sheet. On 10 July 2025, MP Materials announced that the Department of Defense would buy $400 million of newly issued convertible preferred stock plus a warrant, together equal to about 15% of its common shares on an as-converted basis, which positioned the department to become its largest shareholder. The agreement set a 10-year price floor of $110 per kilogram for MP's NdPr products, committed the department to ensure 100% of the output of a planned second magnet plant is purchased for 10 years, and came with a $150 million department loan for heavy rare earth separation at Mountain Pass, according to the company's announcement.

Similar deals followed through the autumn of 2025. Electrive reported on 1 October 2025 that the Department of Energy would take 5% warrant stakes in both Lithium Americas and its Thacker Pass joint venture with General Motors as part of restructuring a $2.26 billion loan. Trilogy Metals announced on 6 October 2025 that the Department of War would invest about $35.6 million in its Alaska projects and hold about 10% of the company, according to its SEC filing. On 3 November 2025, Vulcan Elements and ReElement Technologies announced a $1.4 billion partnership with the Department of War and the Department of Commerce, including $620 million of Office of Strategic Capital loans to Vulcan, $50 million of Commerce equity, and a planned magnet plant with capacity of 10,000 metric tons a year, as reported by GovCon Wire. In June 2026, NIST announced a final CHIPS award to USA Rare Earth of up to $277 million in incentives and up to $1.3 billion in loans, aimed at up to 10,000 tons a year of magnets.

Trade law moved in parallel. The Commerce Department opened a Section 232 investigation into processed critical minerals and their derivative products on 23 April 2025. In a proclamation of 14 January 2026 the President accepted its finding that these imports threaten national security, imposed no tariff at that time, and directed Commerce and the US Trade Representative to negotiate agreements that could include price floors, with a report on the talks due within 180 days, according to analyses by Covington and Clark Hill. The policy signal for buyers was clear. Washington now uses price floors, offtake guarantees and equity to set a value on supply outside China.

Europe writes a rulebook

The European Union chose regulation and project finance. Its Critical Raw Materials Act entered into force on 23 May 2024, according to the Council of the EU. It sets non-binding 2030 benchmarks for each strategic raw material: at least 10% of annual EU consumption from EU extraction, 40% from EU processing and 25% from recycling, with no single non-EU country supplying more than 65%.

The Commission designated 47 strategic projects in 13 member states on 25 March 2025 and 13 more in partner countries in June 2025, for 60 in all, according to Jones Day's May 2026 review and the Council. Strategic projects receive maximum permitting timelines of 27 months for extraction and 15 months for processing or recycling. In December 2025 the Commission presented its RESourceEU action plan, committing up to EUR 3 billion of EU funds over the following 12 months, and proposed amendments to the Act. The Council adopted its position on 4 March 2026, including measures on permanent magnet recycling and information requirements met through product passports.

Seen against a 94% share in sintered magnets, the 65% ceiling describes a long road. The Act's real contribution may be the permitting clock and the data rules, which give a project developer a schedule an investor can underwrite.

Engineers redesign the motor

The materials question reaches the drawing board through physics. A permanent magnet synchronous motor gets its rotor field from the magnet itself, so the rotor carries no current and wastes no energy heating rotor copper. An induction motor must induce current in its rotor, and a wound-rotor machine must feed current to its rotor windings, and both pay for that in losses or complexity. The strength of a magnet is measured by its maximum energy product. The US Department of Energy's February 2022 assessment puts sintered neodymium magnet grades between about 35 and 52 MGOe, and describes research into gap magnets of roughly 10 to 25 MGOe to sit between ferrite and neodymium magnets.

That physics explains the market. IDTechEx, in its report published on 20 October 2025, said permanent magnet motors held a share of the electric car market consistently above 75% from 2015 to 2024. A TimesTech summary of IDTechEx research on 21 November 2025 said 87% of the global EV market used motors containing rare earths in 2024, with roughly 1 to 3 kg of magnets per motor, and that IDTechEx forecasts nearly 30% of the market will use rare-earth-free motors by 2036.

Designers have several responses, and most firms run more than one at once. The first is to cut heavy rare earths. The DOE assessment notes that grain boundary diffusion lets magnet makers reduce dysprosium while keeping heat resistance, and cites expert estimates that a doubling of heavy rare earth prices could cut the heavy rare earth content of certain neodymium magnets by about 43%. Toyota, Nissan and Honda have announced reductions in heavy rare earth content, according to IDTechEx. The second is to remove the magnet. IDTechEx reports that Renault, BMW and Nissan use externally excited, or wound-rotor, synchronous motors in various models, and that Audi uses induction motors. The third is a different magnet, such as ferrite in a redesigned rotor, which drew attention after Tesla said in 2023 that its next motor would be a permanent magnet machine without rare earths.

Each route trades something. A magnet-free rotor adds parts or losses, and a weaker magnet calls for more of it or a cleverer geometry. The useful outcome is a portfolio of motor topologies a buyer can qualify, so that a single license desk no longer sets the production schedule.

Every change becomes the new normal

The historian James Burke built his 1978 BBC series Connections on a simple habit of mind: follow one event to the next and watch an accident in one place reshape an industry in another. The magnet in most electric traction motors has exactly that kind of ancestry, and it begins with a war over a mine. At first light on 13 May 1978, rebels of the Front for the National Liberation of the Congo struck the mining town of Kolwezi in Zaire's Shaba province, the second invasion of the province in two years, as the US Army's Combat Studies Institute history of the event records. Shaba was the center of Zaire's copper and cobalt industry.

The shock traveled through prices. A 2018 study in Frontiers in Energy Research by Brett Zeuner of the University of Michigan reports that cobalt prices rose 24% after the attack, and it draws on a CIA assessment to add that industries from aerospace to magnets began researching substitutes and that within two years cobalt use in US-made magnets fell by half. The strongest commercial magnets of the day were samarium cobalt. IEEE Spectrum's 2022 interview with the inventors recounts that the spike in cobalt prices after the war in Zaire halted General Motors' samarium cobalt work and pushed its researchers to look for a magnet built on cheaper, more abundant elements.

Two teams found the answer separately. At General Motors Research Laboratories, John Croat used rapid solidification and identified a neodymium iron boron compound, while in Japan Masato Sagawa, who had pursued the idea at Fujitsu before moving to Sumitomo Special Metals, developed a sintered neodymium iron boron magnet with a record energy product. IEEE Spectrum reports that the two companies filed patents within weeks of each other in early 1982 and that both teams announced their results at a conference in Pittsburgh in November 1983. Sintered versions of that magnet now turn wind turbines and most EV traction motors, according to the same account.

The chain closes in an uncomfortable place. A supply shock in cobalt pushed engineers toward neodymium, and four decades later neodymium magnets and the heavy rare earths that harden them form the newest supply shock. Behavioral ecologists will recognize the pattern. Jerram Brown argued in 1964 that animals defend a territory when its resources are concentrated enough to be worth the cost of defense, and the writer Desmond Morris made the same instinct familiar to general readers in our own species. Concentrated resources invite defense, and defense invites the search for a substitute.

What looks like a crisis in the moment tends to settle into the background of the next generation's engineering. The samarium cobalt problem of 1978 produced the neodymium magnet that sits in most EV motors today, and the heavy rare earth problem of 2025 is already producing reduced-dysprosium grades, wound rotors and new magnet chemistries. Our job as builders is to notice which constraint is about to become normal and to design for it early.

What we take from it

A company in this market buys, sells or funds products whose bill of materials runs through a short list of refiners and licensing offices. That exposure can be measured and managed like any other engineering constraint. These are the moves we would make now.

1. Map the bill of materials to the element. Trace every motor, actuator and battery cell to the magnet grade, the heavy rare earth content and the refiner, and mark which items sit on MOFCOM's April 2025 list or the suspended October 2025 list.
2. Put the calendar in the plan. Treat 10 November 2026, the date in the November 2025 suspension, as a live risk until MOFCOM publishes otherwise, and set inventory and contract terms against that date and against 10 January 2027.
3. Qualify a second motor topology. Keep at least one validated design with low or zero heavy rare earth content, or a magnet-free rotor, so that a license delay changes a supplier and leaves the launch date alone.
4. Price the floor into offtake. With the Department of Defense guaranteeing MP Materials a floor of $110 per kilogram for its NdPr under the July 2025 agreement, buyers and investors should model supply outside China at a durable premium and write contracts that share that cost.
5. Hold a buffer sized to the license cycle. The IEA's 2026 Outlook estimates that stockpiling 11 high-risk materials would cost countries outside the dominant supplier less than USD 900 million a year, and a company can apply the same logic by holding weeks of magnet stock where it once held days.

The magnet that stopped a line in Chicago was designed in the early 1980s to escape a cobalt shortage that began with a war at a mine in 1978. Each answer to a supply shock creates the next dependency, and the companies that last are the ones that redesign before the shock arrives. We will keep tracking the November date, the licenses and the motors here.