These rare earth elements are integral to the production of both combustion engines and electric vehicles, and the sudden control has left many auto manufacturers scrambling for alternative sources.

Ivan Espinosa, CEO of Nissan, confirmed the immediate impact on the industry, stressing the urgency for automakers to find other solutions. Automotive industry associations across Europe have also expressed their concerns. The European auto suppliers' group CLEPA reported that several plants and production lines have already been forced to shut down due to insufficient rare earth supplies.

CLEPA pointed out a stark discrepancy between export license applications and approvals from Chinese authorities, with only about 25% of submitted applications receiving a green light. The situation has led the German Association of the Automotive Industry (VDA) to warn of potential production halts if the issue is not resolved quickly.

Hildegard Müller, President of the VDA, emphasized that the limited number of export licenses and slow customs clearing processes are creating severe supply chain challenges. She urged German and European Union officials to address the issue promptly with the Chinese government to prevent further manufacturing delays and stoppages.

The demand for rare earth elements is anticipated to surge as the global shift toward clean energy accelerates. China remains a dominant player in the supply chain, producing about 60% of the world's rare earth materials. This dependency has led to strategic concerns among U.S. officials, particularly in the context of advancing toward more sustainable energy solutions.

German carmakers such as BMW have reported impacts on their supply networks. However, Volkswagen and Mercedes-Benz have not yet faced shortages. Mercedes-Benz highlighted their long-term strategy to secure critical raw materials and reduce dependency on rare earth metals by adopting new material compositions for their electric drives.

Meanwhile, Nissan in Japan is actively seeking ways to mitigate the impact of China's export controls by collaborating with the Japanese government and industry associations. Suzuki Motor has already had to suspend production of its Swift model due to the supply constraints.

As the situation develops, the global automotive sector remains on high alert, striving to maintain production while navigating these new challenges in the supply chain. The urgency to find viable alternatives and ensure a steady supply of these crucial materials has never been more critical.