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Automakers warn that China magnet pinch is a threat to car production

U.S. auto executives have warned of an imminent shortage of rare-earth magnetic materials from China, which are used in everything from anti-lock brake sensors to windshield-wipermotors. This could lead to the closing of automobile factories within weeks.

In an unreported letter to Trump Administration officials dated May 9, the head of the group representing General Motors (GM), Toyota, Volkswagen, Hyundai, and other major automakers expressed urgent concerns.

The Alliance for Automotive Innovation sent a letter to the Trump Administration stating that "Without reliable and consistent access to these magnets and elements, automotive suppliers won't be able to produce critical automotive parts, such as automatic transmissions and throttle bodies. They will also not be able to manufacture various motors and sensors, seatbelts, speakers and lights, motors and power steering.

The letter was also signed by MEMA The Vehicle Suppliers Association. It added that without these essential automotive components it would be only a matter time before U.S. car factories were disrupted.

The groups stated that in severe cases it may be necessary to reduce production volumes, or even shut down vehicle assembly lines.

On Friday, both Alliance CEO John Bozzella as well as MEMA CEO Bill Long said that the situation was still not resolved and remained an issue. They thanked the Trump administration for its high-level involvement in preventing disruptions to U.S. automotive production and supply chain.

Bozzella said that the automotive topic was discussed by Treasury Secretary Scott Bessent, U.S. trade representative Jamieson Greer and their Chinese counterparts at the Geneva talks earlier this month.

Greer said on CNBC that China agreed to lift the restrictions on exports of rare earth magnets to U.S. firms, but was not moving quickly enough to allow access to key U.S. industry sectors. "We haven’t seen the flow" of critical minerals that they should be.

China, which controls 90% of the global processing capacity for magnets used everywhere from cars and fighter jets to household appliances, imposed export restrictions in April that required exporters to get licenses from Beijing.

Exports of rare-earth magnets from China have halved since April, as companies struggled to deal with an opaque process of obtaining permits that can require hundreds of pages.

While some licenses were granted to Volkswagen suppliers and others, Indian automakers claim they have not received any. They will be forced to cease production at the beginning of June.

The German auto parts maker Bosch stated this week that the more stringent procedures in China to obtain export licenses have slowed down its suppliers. A Bosch spokesperson called the process "complex and lengthy, in part due to the requirement to collect and supply a great deal of information." (Reporting and editing by David Shepardson, Kevin Krolicki, Sandra Maler;

(source: Reuters)