Rare Earths and Autos: A Joint Venture’s Impact on the Automotive Industry

The automotive industry is undergoing a seismic shift, driven by the rise of electric vehicles (EVs) and advanced driver-assistance systems (ADAS). However, this technological leap hinges on a critical, often overlooked element: rare earth elements (REEs). These seemingly obscure metals are the backbone of modern car manufacturing, powering everything from electric motors to catalytic converters. As demand for EVs surges, the automotive industry’s reliance on REEs has intensified, creating both opportunities and vulnerabilities. A recent report highlighted that every modern car contains rare earth magnets critical for motors and catalysts, with EVs using 1-3 kg of neodymium magnets. This dependence creates a hidden supply chain vulnerability that can halt billion-dollar production lines. This blog post will explore the intricate relationship between rare earth elements and the automotive industry, focusing on the impact of joint ventures aimed at securing a stable and diversified supply of these crucial materials.

The Hidden Role of Rare Earths in Modern Automobiles

Rare earth elements are a group of 17 metallic elements with unique magnetic, luminescent, and conductive properties. They are not necessarily “rare” in terms of abundance in the Earth’s crust, but they are difficult and costly to extract and refine. These elements are essential for various high-tech applications, including:

Electric Vehicle Motors: Neodymium, praseodymium, and dysprosium are used to create powerful permanent magnets that drive EV motors. These magnets offer high efficiency, power density, and torque, making them ideal for electric propulsion.
Catalytic Converters: Cerium oxide is used in catalytic converters to reduce harmful emissions from gasoline-powered vehicles.
Other Automotive Systems: REEs are also found in power steering systems, braking systems, sensors, speakers, and other components.

Even conventional gasoline vehicles rely on REEs for various functions. A Honda audit revealed that over 6,000 suppliers use REEs somewhere in the production chain. Hybrids exacerbate the problem, requiring significantly more REEs than gasoline cars.

The Geopolitical Landscape of Rare Earths

The global rare earth supply chain is heavily concentrated in China, which controls approximately 60% of global REE mining, 85% of refining, and 90% of magnet manufacturing capacity. This dominance gives China significant geopolitical leverage, as demonstrated by export restrictions in the past that disrupted industries worldwide. In 2025, export restrictions forced Ford to halt Explorer production over missing $40 magnets.

This concentration poses a significant risk to the automotive industry, as any disruption to the Chinese supply chain could lead to production delays, increased costs, and even factory shutdowns. The industry is concerned that the situation with rare earths could lead to a third major supply chain shock within five years. The coronavirus epidemic in 2020 and a semiconductor shortage from 2021-2023 led the industry to strengthen its supply chain strategies.

Joint Ventures: A Strategy for Supply Chain Security

To mitigate the risks associated with REE supply chain concentration, automakers and governments are increasingly turning to joint ventures as a way to diversify sources and secure access to these critical materials. These joint ventures typically involve partnerships between:

Automakers: Seeking to ensure a stable supply of REEs for their manufacturing operations.
Mining Companies: Possessing the expertise and resources to extract and refine REEs.
Government Entities: Providing financial support, regulatory guidance, and strategic direction.

One prominent example is the joint venture between MP Materials, the U.S. Department of Defense, and Saudi Arabian Mining Company (Maaden) to build a rare earth refinery in Saudi Arabia. This initiative aims to establish a new refining hub outside of China, reducing reliance on a single source. Vulcan Elements has also secured a $1.4 billion partnership with the U.S. government and ReElement Technologies to establish a fully integrated, domestic rare-earth magnet supply chain anchored by a 10,000-metric-ton factory in North Carolina.

The Impact of Joint Ventures on the Automotive Industry

These joint ventures have the potential to significantly impact the automotive industry by:

Diversifying Supply Chains: Reducing reliance on China and creating alternative sources of REEs.
Stabilizing Prices: Mitigating price volatility caused by supply disruptions or geopolitical tensions.
Promoting Innovation: Encouraging the development of new extraction, refining, and manufacturing technologies.
Supporting Domestic Manufacturing: Creating jobs and boosting economic growth in participating countries.

However, it is important to note that these joint ventures are not without their challenges. They require significant investment, long lead times, and careful coordination between multiple stakeholders. Additionally, they may face regulatory hurdles, environmental concerns, and technological risks.

Alternative Strategies for Reducing Rare Earth Dependence

While joint ventures play a crucial role in securing REE supplies, the automotive industry is also exploring alternative strategies to reduce its dependence on these materials. These include:

Developing Magnet-Free Motors: Some automakers, such as BMW and Tesla, are investing in electric motors that do not require rare earth magnets.
Scaling Recycling Efforts: Recycling end-of-life magnets and electronic waste can help recover REEs and reduce the need for primary mining.
Exploring Alternative Materials: Research is underway to identify alternative materials that can replace REEs in various automotive applications.

The Road Ahead

The relationship between rare earth elements and the automotive industry is complex and evolving. As demand for EVs continues to grow, securing a stable and diversified supply of REEs will be critical for the industry’s success. Joint ventures, along with other strategies such as developing magnet-free motors and scaling recycling efforts, offer promising pathways towards a more resilient and sustainable future for the automotive industry.

The race to secure or replace rare earth elements is now shaping the entire future of mobility. In the next decade, the winners won’t just build better cars; they’ll master the elements that make cars possible.

Is the automotive industry doing enough to mitigate the risks associated with rare earth supply chain concentration? What innovative solutions can be developed to reduce reliance on these critical materials?