The New Industrial Race Powered by Rare Earths

As the global automotive industry transitions toward electric mobility, rare earth elements (REEs) have emerged as the strategic backbone of this transformation. These 17 chemically similar metals—including neodymium (Nd), dysprosium (Dy), praseodymium (Pr), and terbium (Tb)—are essential in manufacturing permanent magnets, batteries, motors, and power electronics used in electric vehicles (EVs). The ability to source, refine, and integrate these materials now defines a nation’s competitiveness in the 21st-century energy economy.

In the race for electric vehicle dominance, control over rare earths determines not just industrial output, but also technological sovereignty, supply chain stability, and geopolitical leverage.

2. Why Rare Earths Are Crucial for EV Technology

Rare earths are used across nearly every critical EV subsystem:

• Permanent Magnets:
  The heart of most EV motors uses neodymium-iron-boron (NdFeB) magnets, which rely on neodymium and dysprosium. These magnets are prized for their high magnetic strength, heat resistance, and efficiency—essential for compact, powerful electric motors.

  • A single EV motor typically contains 2–3 kg of rare earth magnets, while high-performance models can use up to 5 kg.

• Battery Alloys:
  Some nickel-metal hydride (NiMH) batteries—used in hybrid vehicles—contain lanthanum and cerium as hydrogen storage materials. While lithium-ion chemistries dominate pure EVs, rare earths remain essential in solid-state and hydrogen fuel cell innovations.

• Electronics and Sensors:
  EVs depend on cerium for polishing glass and screens, yttrium for phosphors in displays, and europium or terbium in LED and sensor components. Even vehicle cameras, radar, and lidar systems rely on rare earth-based optical coatings and lasers.

• Powertrain and Drivetrain Components:
  Rare earths also appear in electric power steering, braking systems, and inverters, ensuring efficient energy conversion and control.

In short, no major EV system operates without rare earths—from motion to power management to interface.

3. The Global Rare Earth Supply Chain: A Strategic Bottleneck

Despite their name, rare earths are not rare in nature; they are rare in terms of economically viable refining capacity. Over 80% of global refining and magnet production occurs in China, giving it immense influence over global EV supply chains.

This dominance affects competitiveness in multiple ways:

1. Cost and Pricing Power:
   Countries dependent on Chinese refined materials face price fluctuations and export restrictions, directly influencing the cost of EV components and final products.

2. Technology Transfer Leverage:
   China’s vertical integration—from mining to magnet manufacturing—allows it to limit access to high-end magnet technologies, compelling foreign automakers to rely on Chinese partners or localize operations in China.

3. Strategic Vulnerability:
   If geopolitical tensions disrupt supplies, automakers in Japan, Europe, or the U.S. could face production shutdowns, similar to how semiconductor shortages affected the auto industry in 2021–2022.

Thus, control over rare earth refining has become a strategic tool for economic influence and industrial competitiveness.

4. Rare Earths and National Competitiveness: Three Key Dimensions

A. Industrial and Technological Edge

Nations with refining capacity and magnet manufacturing can move up the value chain from raw materials to high-tech products. For example:

• China produces over 90% of NdFeB magnets globally, enabling its dominance in BYD, NIO, and CATL—companies that now compete with Tesla.

• Japan, through firms like Hitachi Metals, historically led high-performance magnet innovation, although it relies heavily on imported raw materials.

• The United States is rebuilding domestic supply chains through projects like MP Materials (Mountain Pass) and Lynas USA, but these remain in early stages.

Technological competitiveness is thus tied to how deeply a nation can integrate rare earths into domestic EV design, manufacturing, and innovation ecosystems.

B. Economic and Employment Impact

Building domestic rare earth and EV infrastructure boosts:

• Manufacturing jobs in materials science, metallurgy, and motor design.

• Investment ecosystems around clean technology supply chains.

• Export competitiveness, as nations with local magnet and battery factories can export high-value EV components rather than raw ore.

For instance, China’s rare earth value chain—from Inner Mongolia’s mines to coastal EV factories—supports millions of skilled jobs and contributes tens of billions annually to GDP.

C. Geopolitical Leverage

Rare earths also carry strategic influence. Nations controlling these materials can shape global EV markets, dictate trade terms, or influence energy policy alignment.
In contrast, nations dependent on imported refined materials risk strategic subordination—they may have industrial goals constrained by foreign supply chains.

5. The Battery Connection: Parallel Dependencies

Although lithium, nickel, and cobalt dominate battery headlines, rare earths also play subtle but crucial roles in:

• Battery electrodes and additives, improving conductivity and thermal stability.

• Battery management systems (BMS), where rare earth sensors and magnets regulate voltage and cooling.

• Future chemistries, such as lanthanum-based solid electrolytes and hydrogen storage systems.

In this sense, rare earths and lithium technologies form complementary dependencies. A nation may secure lithium mining rights but still lag behind in EV competitiveness without access to rare earth magnets and components.

6. The Strategic Forecast (2025–2035)

(1) Short-Term (2025–2028): Intensifying Supply Chain Nationalism

• The U.S., EU, Japan, and Australia will accelerate investment in domestic refining and magnet plants.

• Trade alliances like the Minerals Security Partnership (MSP) will grow, linking democratic nations for shared supply security.

• China will maintain dominance but may face increased scrutiny over environmental and export practices.

(2) Mid-Term (2028–2032): Technological Substitution and Recycling

• Recycling of rare earth magnets from old electronics and EVs will scale up, particularly in Europe and Japan.

• Research into magnet-free motor designs (such as induction or axial flux motors) may begin to reduce dependence—but not eliminate it.

• Countries with advanced recycling infrastructure will gain cost advantages and resource resilience.

(3) Long-Term (2032–2035): Fragmented Global Leadership

• China’s grip will loosen as India, Africa, and Southeast Asia become new mining hubs.

• Nations that combine mining, refining, and manufacturing ecosystems will define the next industrial powers.

• Africa’s rare earth reserves, if developed with refining capacity, could shift global manufacturing geography toward the Global South.

7. Strategic Lessons for Nations and Industries

1. Mining is not enough — refining and magnet production are the true levers of power.

2. Supply chain resilience requires diversification, not duplication.

3. Environmental sustainability in refining will determine public acceptance and long-term cost competitiveness.

4. Collaboration with Africa and Southeast Asia can secure alternative sources while promoting global equity in the energy transition.

5. Innovation ecosystems—linking materials science with EV R&D—create the lasting edge that raw material possession alone cannot.

 Rare Earths as the “Currency” of Industrial Power

Rare earths are more than chemical elements—they are strategic enablers of industrial independence and technological leadership. As electric vehicles redefine the global economy, the nations that master the full rare earth value chain—from geology to gigafactory—will hold the keys to the next century of innovation.

Control over rare earths is therefore not merely about resources, but about who shapes the pace, cost, and future of electrification itself. Those who fail to secure access risk not just economic disadvantage—but exclusion from the defining technological revolution of our time.