China’s Rare Earth Restrictions Spark Factory Closures in Europe’s Auto Sector

June 4, 2-025: Several European auto supplier plants have been forced to halt production due to a critical shortage of rare earth elements, following China’s decision in April to impose strict export restrictions, according to Europe’s auto supplier association, CLEPA.

The rare earth shortage is already disrupting supply chains across Europe’s automotive sector, and CLEPA warns the situation could worsen significantly within the next month if current licensing issues are not resolved. The association revealed that only about 25% of export license requests submitted since early April have been approved by Chinese authorities. Many other requests have reportedly been rejected on “highly procedural grounds”, raising concerns over inconsistent provincial processes and demands for sensitive intellectual property information.

CLEPA emphasized that if licensing remains this slow and unpredictable, more plant closures are expected within three to four weeks as rare earth inventories continue to dwindle.

China’s rare earth export controls—covering materials crucial for producing electric vehicle motors, advanced semiconductors, aerospace components, and military technologies—have sent shockwaves through global industries. Industry groups in Germany, the U.S., and India are now urging their governments to pressure Beijing for a diplomatic resolution.

The restrictions come at a time when Europe is heavily focused on building a resilient and green industrial base, especially in electric mobility. The reliance on Chinese rare earths—key for producing high-performance magnets and battery components—has long been a strategic vulnerability.

Unless export processes are streamlined quickly, Europe’s auto manufacturing momentum may face a significant slowdown, impacting production timelines, jobs, and supply chain stability across the continent.