India’s auto sector remains resilient, producing 25.8 lakh vehicles in May 2025 a 5.2% year-on-year rise. Domestic sales reached 20.1 lakh units, led by two-wheelers at 16.6 lakh units and passenger vehicles at 3.45 lakh units. Despite a 0.8% dip in passenger vehicle sales, the industry shows steady growth and robust output.
Recently, China’s restriction on rare earth magnet exports to India is set to create fresh production hurdles for Indian EV and auto component manufacturers. Essential for traction motors and other automotive parts, these magnets’ limited availability may disrupt supply chains, raise costs, and drive efforts toward alternative sourcing, local extraction, or recycling solutions, prompting strategic adjustments.
The Nifty Auto Index surged 421 points (1.8%) to 23,559.50 following reports that India may explore Australia as an alternative source for rare-earth magnets. These materials are essential for electric and hybrid vehicles, and with India currently importing 80% from China, the move signals a shift toward supply diversification.
Further, India is set to boost critical mineral sourcing from Australia and expand domestic production under the National Critical Minerals Mission. Key measures include waste testing, circular economy-driven recycling, and potential non-PLI support for mining. Additionally, India is strengthening partnerships with Argentina, Brazil, and Chile to ensure long-term mineral security.
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Rare-earth magnets are crucial for permanent magnet synchronous motors (PMSMs), key components in electric vehicles (EVs) due to their efficiency, high torque, and compact design. Hybrid vehicles also significantly depend on these magnets, making them essential for enhancing performance and driving the shift toward cleaner mobility solutions.
Manoj Bahety of Carnelian Asset Management noted a limited near-term impact on the broader auto sector, as inventory levels remain stable. While EVs face some disruption due to US-China trade tensions, traditional ICE vehicles, two-wheelers, tractors, auto ancillaries, and passenger vehicles are expected to benefit from improving demand and a favorable monsoon.
Here are the auto stocks that jumped after Australia became an alternative source for rare-earth magnets
| Company Name | CMP | Increased % |
| Eicher Motors Ltd | 5,408.50 | 3 |
| Bajaj Auto Limited | 8,531.50 | 2 |
| TVS Motor Company Ltd | 2,805.00 | 2 |
| Maruti Suzuki India Ltd | 12,735.00 | 3 |
| Mahindra And Mahindra Ltd | 3,042.40 | 2 |
| UNO Minda Ltd | 1,071.30 | 3 |
Written by Abhishek Singh
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