Chinese friction is pushing electric car makers away from rare earth magnets

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LONDON (Reuters) – As tensions rise between China and the United States, automakers in the West are trying to reduce their reliance on a key driver of the electric car revolution – permanent magnets, sometimes smaller than a cardstock, power electric motors.

Most of them are made of rare earth metals from China.

The minerals in magnets are already abundant, but they can be dirty and difficult to produce. China has grown to dominate production, and with magnets in growing demand for all forms of renewable energy, analysts say there is a real shortage ahead.

Some car companies have been looking to replace rare earth elements for years. A Reuters analysis has now found that manufacturers that account for nearly half of global sales say they are limiting their use.

Automakers in the West say they are concerned not only about securing supplies, but also about huge price swings, and environmental damage to the supply chain.

This means managing the risk that scrap metal can shorten the distance a vehicle can travel between charges. Without a solution to this, concern about scale that has held the industry for a long time will grow, so access to minerals may become a competitive advantage.

Rare-earth magnets, made mostly of neodymium, are widely seen as the most efficient way to power electric vehicles (EVs). China controls 90% of its supply.

Neodymium oxide prices more than doubled in the nine months of recovery last year and are still up 90%; The US Commerce Department said in June that it was considering an investigation into the impact of neodymium magnet imports on national security.

Among the companies trying to scale back its use is Japan’s third-largest automaker Nissan Motor Co. (7201.T), which told Reuters it was removing rare earths from the engine of its new Arya model.

Germany’s BMW AG (BMWG.DE) has done the same for its iX3 electric SUV this year, and the world’s two largest automakers, Japan’s Toyota Motor Corp. (7203.T) and Germany’s Volkswagen AG (VOWG_p.DE) told Reuters that they are also reducing Also of metal. (For facts, see Read More)

Rare earths are essential to the electronics, defense and renewable energy industries. Since some can generate a static magnetic force, the magnets they make are known as permanent magnets.

Electric vehicles with these require less battery power than those with regular magnets, so vehicles can travel longer distances before recharging. They were the illogical choice for EVs until about 2010 when China threatened to cut off supplies of rare earths during a dispute with Japan. Prices boomed.

Now, supply concerns are opening a gap between Chinese electric car producers and their Western competitors.

While automakers in the West are on the decline, the Chinese still make cars with permanent magnets. If geopolitical risks are put aside, China’s capacity can “fully meet the needs of the world’s auto industry,” a Chinese official in the rare earth industry told Reuters.

In all, based on sales data from JATO Dynamics, manufacturers that account for 46% of all light vehicle sales in 2020 said they have eliminated, plan to phase out or are reducing rare earth elements in electric vehicles.

New projects are emerging to develop electric motors without metals, or to promote the recycling of magnets used in existing vehicles Read more.

“Companies that spend tens or hundreds of millions of dollars developing a family of products … don’t want to put all their eggs in one basket – that’s the Chinese basket,” said Murray Eddington, who runs the electric power generation division of the British consultancy. Drive system design. “They want to develop alternatives.”

BMW says it has redesigned its electrical technology to make up for the shortage of rare earth elements; Renault SA (RENA.PA) has customized the rare-earth Zoe model into a growing niche of compact urban cars that don’t need extended driving ranges.

Tesla Inc (TSLA.O), the US electric car giant with a market capitalization of $621 billion just under the top five car manufacturers combined, chooses both types of engines.

“You pull your hair out to decide if you think supplies will be viable in the future and at what price,” said Ryan Castillo of Canadian consultancy Adamas Intelligence.

His consultancy expects global consumption of rare earths for magnets to rise to $15.7 billion by 2030, nearly four times this year’s value.

Electric vehicles and wind turbines

Neodymium is a strong metal. A neodymium magnet in a typical electric car weighs up to 3 kg (6 lbs), but even at 1/12 of that weight, a neodymium magnet can support heavy steel like prizefighter Tyson Fury, and will have about 18 times more magnetic energy than the company said. British magnet Banting told Reuters.

Although the pandemic has slashed car sales, demand for these magnets in electric vehicles rose 35% last year alone to 6,600 tons, Adams Intelligence says.

Analysts say permanent magnets in hybrid motors and electric vehicles cost more than $300 per vehicle, or as much as half the cost of the motor.

Analysts at investment bank UBS expect electric models to make up half of global new car sales by 2030, up from just 4% last year. Magnets are also in demand for wind turbines, with global installations jumping 53% last year, according to the industry trade group.

Over the past two decades, Western countries have largely withdrawn from the production of rare earth minerals, which involve complex processing and often harmful by-products. Today, China’s dominance extends across the entire production chain.

David Merriman of Roskill, a London-based biomaterials consultancy, said: “The upstream REE supply chain, including mining and processing, is certainly a major concern, but when it comes to the actual production of renewable energy magnets, China has the most grip. tightly”.

not enough

For many electric vehicle drivers, range anxiety may not be an issue.

“Most people drive less than 100 miles a day, so you could have a less efficient engine,” said researcher Jürgen Gassmann at the Fraunhofer IWKS in Germany.

However, automakers in the West have adopted a range of strategies. Some, such as Toyota, still use permanent magnets but have scaled back the use of rare earth elements, developing magnets that need 20%-50% less neodymium.

Other companies, such as BMW, have made major redesigns: The German automaker told Reuters it has overhauled its drive unit to combine the engine, electronics and transmission into one housing, reducing space and weight.

“Our goal for the future is to avoid rare earth elements as much as possible, and to be independent of potential cost, availability – and of course – sustainability risks,” said Patrick Hood, Vice President of Raw Materials Management at BMW.

Tesla started in 2019 to combine engine types. Its S and X models have two motors: one with rare earth magnets and one without. An induction motor delivers more power, while a permanent magnet motor is more efficient, Tesla said: Including a rare earth motor, the models boosted the models’ driving range by 10%. Volkswagen also uses both types of engines in its new ID.4 crossover SUV.

Use of non-rare earth electric motors is set to jump nearly eightfold by 2030, according to Claudio Vittori, senior analyst for e-mobility at data analytics firm IHS Markit. But he said permanent magnet motors will continue to dominate, mainly because of their power and efficiency.

If the forecast is correct, it is not certain that even these adjustments can calm the market.

“I think we need these innovations to help balance the really strong demand growth that we’re looking at,” Castillo says. “There is no scenario in which the show will suffice.”

Additional reporting by Aimee Yamamitsu in Tokyo, Jan Schwartz in Hamburg, Christoph Stitz in Frankfurt, Yili Sun in Beijing, Tom Daly; Edited by Veronica Brown and Sarah Ledwith

Our Standards: Thomson Reuters Trust Principles.

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