Workers assemble cars on the assembly line at the Volkswagen automobile factory on March 07, 2025 in Wolfsburg, Germany.
Sean Gallup | Getty Images News | Getty Images
China appears to have offered U.S. and European auto giants something of a reprieve after industry groups warned of increasing production threats over a rare earth shortage.
China’s Ministry of Commerce on Saturday said it was willing to establish a so-called “green channel” for eligible export license applications to expedite the approval process to European Union firms. A Ministry of Commerce spokesperson said Wang expressed hope that the EU would take “reciprocal steps” and adopt measures to promote compliant trade of high-tech products with China.
The breakthrough comes after trade talks between Chinese Commerce Minister Wang Wentao and EU Trade Commissioner Maros Sefcovic met in Paris, France last week.
Beijing also granted rare earth licenses to suppliers of U.S. auto giants General Motors, Ford and Jeep-maker Stellantis, Reuters reported on Friday, citing unnamed sources. The report said China’s Ministry of Commerce did not respond to a faxed request for comment. CNBC has contacted GM, Ford and Stellantis.
China’s Ministry of Commerce in early April imposed export restrictions on several rare earth elements and magnets widely used in the automotive, defense and energy sectors. The curbs were part of a response to U.S. President Donald Trump’s tariff increase on Beijing’s products.
Some of the affected rare earth elements were critical components to the production of both combustion engines and electric vehicles.
Maximilian Butek, an executive director and board member of the German Chamber of Commerce in China, said the weekend announcement was certainly good news for European businesses, but noted that it remains unclear whether the fast-track channel applies to large-scale firms or to sectors more broadly.
“It is a huge bureaucratic monster that they’ve created and I’m not sure if they really can now speed up the process and give the licenses to those who need them,” Butek told CNBC’s “Europe Early Edition” on Monday.
Europe’s top automakers will welcome the diplomatic breakthrough, Butek said, while stressing the European bloc’s need to improve supply chain diversification.
Workers transporting soil containing rare earth elements for export at a port in Lianyungang, Jiangsu province, China, Oct. 31, 2010.
Stringer | Reuters
“It all hit us quite by surprise that China is even willing to draw this card because this is a retaliation measurement towards the tariffs the U.S. implemented, right? And we, as European companies, we are now in the crossfire of this trade escalation, and this is really not where we want to be,” Butek said.
“It is not enough just to announce it but they have to show it,” he added.
China’s critical mineral dominance
China is the undisputed leader of the critical minerals supply chain, accounting for roughly 60% of the world’s production of rare earth minerals and materials. U.S. officials have previously warned that this dominance poses a strategic challenge amid the pivot to more sustainable energy sources.
Some analysts have compared the industry-wide squeeze on supplies of rare earth magnets to the global semiconductor crisis that disrupted automotive production during the coronavirus pandemic.
Speaking to CNBC before China announced plans to expedite the approval process of rare earth exports to the EU, the European Automobile Manufacturers’ Association (ACEA) said some of its members were at risk of production outages starting as soon as next month.
The car lobby group, which represents the likes of Stellantis, Renault, Ferrari, Volkswagen and Volvo, said rare earth export licenses by China’s Ministry of Commerce had been taking a “significant” amount of time to process since the April restrictions came into force.
“Generally, global stocks of these magnets are quite low. And, given that China is the bulk global supplier, it has meant that, in the absence of these export licenses, those stocks have been depleting progressively since the start of April,” Jonathan O’Riordan, international trade director at ACEA, told CNBC by phone.
“We’re gradually coming into a very, very critical moment whereby those stocks are now being exhausted, and we are potentially going to see production stoppages,” he added.
A general view of production lines at the Mercedes-Benz assembly plant on June 4, 2025 in Rastatt, Germany.
Florian Wiegand | Getty Images News | Getty Images
ACEA’s warning followed a separate ominous update from the European Association of Automotive Suppliers.
Last week, the group said that several auto supplier plants and production lines had already been shut down due to Beijing’s recent export restrictions, with further outages expected as rare earth inventories deplete over the coming weeks.
Japanese automaker Suzuki Motor, however, suspended production of its Swift car due to China’s rare earth curbs, Reuters reported Thursday, citing two unnamed sources. A Suzuki Motor spokesperson did not respond to a request for comment when contacted by CNBC.
Demand for rare earths and critical minerals is expected to grow exponentially in the coming years as the clean energy transition picks up pace.
