Rare Earths Are Becoming the EV Supply Chain’s Greatest Chokepoint

Article Highlights:

• Rare earth elements—also often referred to as rare earth metals, or simply rare earths—are a group of 17 metallic elements. These elements are characterized by a silvery-white coloring, and are generally soft and malleable. 
• Rare earth elements are essential to manufacturing electric vehicles, which utilize a type of motor called a permanent magnet synchronous motor (PMSM), which uses magnets embedded in the rotor to create a sustained magnetic field that allows the motor to create torque and run. 
• Beijing’s throttling of the global supply of rare earths had a significant impact on the EV supply chain, as automakers in the U.S., Europe, and elsewhere struggled to secure sufficient magnets for their electric vehicle motors. The effects—while not outright disastrous—demonstrate the pitfalls of such a high geographical concentration of these resources. 

The electric vehicle (EV) market is in the midst of a staggering period of growth. At the beginning of the decade, in 2020, global EV sales totaled around three million vehicles. Jump ahead just four years, to 2024, and that figure surged to 17 million—an increase of nearly sixfold in less than half a decade. And though the market’s growth is not evenly distributed across the globe—China currently accounts for around two-thirds of all global EV sales—there continue to be signals of robust demand all over the world. 

The EV industry’s rapid rise has been mirrored by the expansion of its supply chain, an intricate manufacturing network that encompasses everything from electronic components to steel and aluminum to rare earth elements (REEs). It is this latter category that represents the industry’s most significant vulnerability, however, posing myriad risks to a supply chain that cannot afford to be derailed by a shortage, chokepoint, or other large-scale disruption. 

As it stands, though, REEs are still essential materials in the manufacturing of electric vehicles. Unless the industry takes significant steps to modify their supply chains or otherwise mitigate this risk, they’ll be living with a profound sourcing hazard hiding in plain sight.

What Are Rare Earth Elements (REEs)?

Rare earth elements—also often referred to as rare earth metals, or simply rare earths—are a group of 17 metallic elements. These elements are characterized by a silvery-white coloring, and are generally soft and malleable. 

• Lanthanum 
  
  • Symbol: Ln
  • Atomic Number: 57

• Cerium
  
  • Symbol: Ce
  • Atomic Number: 58

• Praseodymium
  
  • Symbol: Pr
  • Atomic Number: 59

• Neodymium
  
  • Symbol: Nd
  • Atomic Number: 60

• Prometheum
  
  • Symbol: Pm
  • Atomic Number: 61

• Samarium
  
  • Symbol: Sm
  • Atomic Number: 62

• Europium
  
  • Symbol: Eu
  • Atomic Number: 63

• Gadolinium
  
  • Symbol: Gd
  • Atomic Number: 64

• Terbium
  
  • Symbol: Tb
  • Atomic Number: 65

• Dysprosium
  
  • Symbol: Dy
  • Atomic Number: 66

• Holmium
  
  • Symbol: Ho
  • Atomic Number: 67

• Erbium
  
  • Symbol: Er
  • Atomic Number: 68

• Thulium
  
  • Symbol: Tm
  • Atomic Number: 69

• Ytterbium
  
  • Symbol: Yb
  • Atomic Number: 70

• Lutetium
  
  • Symbol: Lu
  • Atomic Number: 71

• Scandium
  
  • Symbol: Sc
  • Atomic Number: 21

• Yttrium
  
  • Symbol: Y
  • Atomic Number: 39

REEs have become crucial resources to modern manufacturing. They’re now utilized by a range of industries, including consumer electronics, telecommunications, automotive, and aerospace and defense, with manufacturers relying on the elements to produce smartphones, electric vehicles, lasers, and missile guidance systems, among other applications. While REEs often only represent a small percentage of the total materials or weight of a given product, their inclusion in the design can be indispensable. As the U.S. Geological Survey explains, “Although the amount of REE used in a product may not be a significant part of that product by weight, value, or volume, the REE can be necessary for the device to function.”

Over the past 25 years, the mining and processing landscape for rare earth elements has evolved in several consequential ways. In the early 1990s, REE production was distributed across a number of countries and geographical regions, including China, the U.S., Australia, and India. But over the course of the following three decades, the Chinese government carried out a national strategic initiative to expand its share of global REE production. That initiative worked. By 2011, China was responsible for around 97% of the total worldwide production of the 17 REEs. While that figure has slipped in the intervening decade, the nation still controls over 70% of the global mining and refining of rare earth elements. 

The disproportionate control that China now has over the global supply of rare earth elements is a major reason why the resource presents such a profound risk to EV makers and their supply chain.

But over the course of the following three decades, the Chinese government carried out a national strategic initiative to expand its share of global REE production. That initiative worked.

Why Are Rare Earth Elements Critical to the EV Supply Chain?

Rare earth elements are essential to manufacturing electric vehicles—but not necessarily for the reasons many people think. A common misconception is that rare earths are used for EV batteries. However, electric vehicles primarily rely on lithium-ion batteries, which are made using lithium, nickel, cobalt, manganese, and graphite. 

Instead, it’s the EV motors that are highly dependent on REEs. Many electric vehicles utilize a type of motor called a permanent magnet synchronous motor (PMSM), which uses magnets embedded in the rotor to create a sustained magnetic field that allows the motor to create torque and run. Permanent magnet synchronous motors use several rare earth elements:

• Neodymium
• Samarium
• Dysprosium
• Terbium
• Praseodymium

The EV Supply Chain Chokehold 

As discussed earlier, China now dominates the mining and refining processes for the world’s 17 rare earth elements. That makes the nation a very powerful player in the growing EV industry, with the majority of electric vehicle manufacturers having to source at least some of their raw materials from China.

The problem for automakers and other original equipment manufacturers (OEMs) in the U.S., the European Union, and other countries is that China has demonstrated a willingness to exploit that supply chain leverage. An oft-cited example of how the nation’s REE dominance can impact other countries is the 2010 dispute between China and Japan.

The 2010 Japanese Rare Earth Crisis

Following a minor maritime skirmish near the Senkaku Islands, when a collision between Chinese and Japanese fishing vessels triggered a diplomatic conflict, China responded by imposing restrictions on rare earths being exported to Japan. In the wake of the export controls, Japan struggled to secure alternative sourcing, and the country’s manufacturing industries floundered. While the dispute was resolved later that year, the episode has endured as a powerful reminder of just how much leverage China possesses when it comes to REEs. As a recent white paper published by UK auto manufacturer Advanced Electric Machines points out, “the structural vulnerabilities it exposed remain and are now exponentially more critical given global EV dependency.”

Of course, the 2010 export controls against Japan are far from the only example of China throttling access to rare earth elements to punish or gain a geopolitical advantage over a perceived adversary. Over the past few years, the nation has imposed export controls on REEs and critical minerals on several occasions. The most notable example may have come in April 2025, when China’s Ministry of Commerce implemented export restrictions on seven REEs, a maneuver that was largely seen as a response to U.S. President Trump’s extensive tariffs on Chinese goods. 

China’s REE Dominance Constrains the EV Supply Chain

According to official customs data, Chinese exports of rare earth elements dropped by half in April. The following month saw an even steeper decline. Beijing’s throttling of the global supply of rare earths had a significant impact on the EV supply chain, as automakers in the U.S., Europe, and elsewhere struggled to secure sufficient magnets for their electric vehicle motors. The effects—while not outright disastrous—demonstrate the pitfalls of such a high geographical concentration of these resources. 

• Prices for rare earths increased substantially, with European rates for some REEs reaching as much as six times their cost in China.

• The sharp price increases for REEs in non-China countries negatively affected cost competitiveness, bolstering China’s stranglehold on the supply chain rather than diversifying sourcing and competition. 

• Some auto manufacturers were forced to temporarily shutter factories, impacting production targets and timelines. 

Even after the U.S. and China brokered a peace deal in May and Chinese officials promised to restore access to REEs, a delay in export license issuance triggered further chaos among U.S. OEMs. The end result, unsurprisingly, was additional factory shutdowns and production stoppages. As the Center for Strategic and International Studies (CSIS) pointed out later that year, “the episode underscored how Beijing’s rare earth policy has evolved into a potent instrument of economic and geopolitical leverage.”

These developments demonstrate just how precarious access to rare earth elements continues to be. If the EV supply chain is going to continue to depend on sourcing elements like neodymium, samarium, and dysprosium from China, they’re going to be implicitly accepting a certain level of perpetual sourcing risk. 

There are, however, changes on the horizon for this rapidly growing industry. A number of EV manufacturers are beginning to conclude that REEs may not be worth the profound strategic vulnerability they come with. Over the past year or two, several automakers have started to probe for ways to reduce their reliance on China’s resources. These include not only developing new REE supply chains independent of China, but also investigating the viability of motors that don’t need rare earth elements at all. Automakers like Honda, Tesla, Nissan, and General Motors are all at varying stages of exploring alternative methods for manufacturing their EVs, including through the use of induction motors and switched reluctance motors (SMRs).

If the EV supply chain is going to continue to depend on sourcing elements like neodymium, samarium, and dysprosium from China, they’re going to be implicitly accepting a certain level of perpetual sourcing risk. 

How Z2 Helps Companies Map Their Material Dependencies

Businesses that want to see the full picture of their sourcing vulnerabilities can benefit from the insights and intelligence provided by a supply chain risk management (SCRM) tool. SCRM software Z2 offers industry-leading supply chain mapping, including insights into direct and sub-tier suppliers, fabs, EMS sites, and other manufacturing locations through intuitive diagrams and visualizations. 

In addition, Z2 provides n-tier supply chain mapping that helps businesses trace their goods to the raw material level—shedding light on the geographical origins of rare earth elements, critical minerals, and other key resources that often carry disproportionate risk. Z2’s multi-tier mapping offers a range of benefits:

• Map direct and sub-tier suppliers, allowing businesses to assess the risks embedded throughout their supply chain.

• Identify sourcing concentrations and vulnerabilities. 

• Access a single centralized dashboard that combines all data sources to create the most comprehensive supply chain mapping possible.

• Utilize Z2’s supplier relationship database, yielding insights into chokepoints, dependencies, and other vulnerabilities. 

To learn more about Z2 and how it can help companies map their supply chains and pinpoint their most pressing raw material exposures, schedule a free trial with one of our product experts.