How the ₹7K Cr Rare Earth Scheme Will Supercharge EVs in India

India's Union Cabinet approved a landmark ₹7,280 crore scheme on November 26, 2025, to build a fully integrated rare earth permanent magnet (REPM) manufacturing ecosystem, slashing import dependence and turbocharging the electric vehicle (EV) revolution. With five units targeting 6,000 tonnes per annum (TPA) capacity over seven years, this initiative promises self-reliance in high-performance magnets essential for EV motors, potentially cutting costs by 20-30% and accelerating India's 30% EV sales target by 2030.​

What Are Rare Earth Magnets and Why Do EVs Need Them?

Rare earth permanent magnets (REPMs), particularly neodymium-iron-boron (NdFeB) types, are the world's strongest magnets with no viable substitutes for high-efficiency applications. A mid-size EV requires 1-2 kg per motor, while larger models or two-wheelers demand even more for traction and regenerative braking—making up 40-50% of motor costs.​

India, holding 6.9 million tonnes of rare earth reserves (top 3 globally), imports nearly 100% of REPMs, mostly from China, exposing the sector to supply risks and price volatility. EV battery demand alone is set to double REPM consumption from 2025 to 2030, pushing annual needs to thousands of tonnes amid booming sales of 1.3 million EVs in FY24 scaling to 10 million by 2030.​

Breaking Down the ₹7,280 Cr Scheme: Structure and Incentives

The scheme, overseen by the Department of Atomic Energy, Ministry of Mines, and NITI Aayog, spans seven years: two for gestation and five for incentives. Key components include:​

• ₹750 crore capital subsidy: Covers 30% CAPEX for end-to-end facilities—from rare earth oxide refining to metal, alloy, and sintered magnet production.​

• ₹6,450 crore production-linked incentives (PLI): Sales-tied rewards over five years, attracting ₹20,000+ crore total private investment.​

• Five integrated units: Each up to 1,200 TPA via global competitive bidding, creating India's first complete REPM value chain with surplus for exports.​

Aligned with the National Critical Mineral Mission (NCMM, ₹16,300 crore budget launched January 2025), it mandates high environmental standards and supports recycling of lithium, cobalt, and rare earths.​

Direct Impact on India's EV Ecosystem

This scheme supercharges EVs by localizing magnet production, which comprises 25-35% of EV motor costs—directly lowering vehicle prices and boosting affordability. With EV production projected at 50 GWh batteries by 2030 (from 12 GWh in FY24), domestic REPMs will stabilize supply chains, reduce forex outflow (currently ₹5,000+ crore annually), and shield against global disruptions like China's export curbs.​

Auto giants like Tata Motors and Mahindra stand to gain: a 1-kg magnet drop from ₹5,000 (imported) to ₹3,500 (local) could shave ₹10,000-20,000 off per EV, spurring mass adoption in two-wheelers (80% of India's EV market). SIAM President Shailesh Chandra hailed it as a "game-changer for clean mobility," cutting crude oil imports and emissions while creating 50,000+ jobs in mining, processing, and manufacturing.​

Beyond EVs: Ripple Effects Across Industries

While EVs drive 60-70% demand, REPMs power wind turbines (600 kg per 3 MW unit), drones, satellites, medical devices, and defence—aligning with Net Zero 2070 and Viksit Bharat@2047. ACMA President Vikrampati Singhania called it "foundational for advanced mobility," fostering R&D in alloys and positioning India as a global exporter amid rising electronics demand.​

Environmentally, facilities must meet stringent norms, recycling 270 KT minerals annually under NCMM to minimize mining impacts in Odisha, Andhra, and Kerala sands.​

Industry Reactions: Unanimous Applause

• SIAM: "Pivotal for energy security and carbon reduction."​

• ACMA: "Stimulates investments, integrates India into global EV chains."​

• Experts: Amitabh Kant emphasized escaping "China's monopoly," with Vedanta securing 10 critical mineral blocks for cobalt and REEs.​

Stocks in rare earth plays like NMDC and Vedanta surged 5-10% post-announcement, signaling market confidence.​

Challenges and Road Ahead

Bidding winners (expected Q1 2026) face tech hurdles in alloying and sintering, plus skilled labor gaps—addressed via NCMM training. Global competition from Australia and Vietnam looms, but India's reserves and PLIs give edge. Full self-reliance by 2030 hinges on execution, with Phase 2 eyeing 12,000 TPA.​

Projected Outcomes: A Self-Reliant EV Powerhouse

By 2030, zero import dependence could save ₹10,000 crore yearly, fuel 30% EV penetration, and export ₹5,000 crore REPMs—mirroring PLI success in mobiles. This scheme doesn't just supercharge EVs; it powers India's clean energy leap, from scooters to satellites.​