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By Piyush P. Yadav

Almost every electric scooter, car, bus and three-wheeler sold in India runs on a permanent-magnet motor, and almost every one of those magnets is imported from China. That dependence stopped being an abstraction in the summer of 2025, when Beijing’s export licensing regime for heavy rare-earth magnets left Bajaj, Ather and TVS cutting scooter production for months. The Centre’s answer is the Rs 7,280 crore Scheme to Promote Manufacturing of Sintered Rare Earth Permanent Magnets, approved by the Cabinet in November 2025 and now at the bid-evaluation stage: the Ministry of Heavy Industries opened 20 technical bids on 13 August 2026 from a field that includes Larsen and Toubro, Coal India, Attero, Lohum and Singapore’s Neo Performance Materials. This explainer sets out what the scheme pays for, who is bidding, why a scooter motor cannot simply do without these magnets, and what 6,000 tonnes a year would and would not fix.

Why an EV motor needs rare-earth magnets

The motors in the Bajaj Chetak, TVS iQube, Ather 450 and Rizta, Ola S1, every Tata and Mahindra electric car and most electric buses are permanent-magnet synchronous motors. Their rotors carry sintered neodymium-iron-boron magnets, usually with a few per cent of dysprosium or terbium added so the magnet keeps its strength at the 120 to 150 degrees Celsius a working motor reaches. Those two additives are the heavy rare earths that China restricted in April 2025. A permanent-magnet motor is smaller, lighter and 3 to 5 percentage points more efficient than an induction motor of the same output, which is why the industry standardised on it; switching a scooter to a magnet-free induction or reluctance motor means a heavier vehicle with less range and a full re-certification.

A typical electric two-wheeler motor uses about 300 to 500 grams of NdFeB magnet; an electric car motor uses 1 to 2 kg, and a bus traction motor several kilograms. At the roughly 2 million electric two-wheelers, 1.5 lakh electric cars and a few thousand buses India will sell in 2026, the country’s EV sector alone needs well over 1,500 tonnes of finished magnets a year, before wind turbines, air-conditioner compressors, hard drives and defence equipment are counted.

What happened in 2025 and why it matters

From 4 April 2025 China required an export licence for seven heavy rare-earth elements and the magnets containing them, and licences for Indian buyers were slow to arrive. By July the shortage was in its fourth month. Bajaj Auto, then the second-largest electric two-wheeler maker, said it would roughly halve Chetak output; Ather planned an 8 to 10 per cent cut; TVS, the market leader, also trimmed production. Ola, which had stockpiled and used a different supply chain, was largely unaffected. Bajaj later redesigned some motors to use light-rare-earth-only magnets and rebuilt its sourcing, recovering about half of planned July output and around 60 per cent through August and September. The Ministry of Heavy Industries and industry bodies negotiated with Beijing and explored supply from Vietnam, Japan and Indonesia in parallel.

The episode showed that a Rs 1 lakh scooter could be held up by a few hundred grams of magnet, and it landed at the same time as China’s October 2025 controls on battery and anode technology, which we examined in our report on India’s battery supply chain and China’s export controls. The magnet scheme is the motor-side counterpart of the battery PLI.

What the scheme actually offers

Element Detail
Total outlay Rs 7,280 crore
Sales-linked incentive Rs 6,450 crore, paid on sales of magnets for five years
Capital subsidy Rs 750 crore towards plant set-up
Target capacity 6,000 tonnes per annum of sintered NdFeB magnets, integrated from oxide to finished magnet
Beneficiaries Up to five, each allotted up to 1,200 tonnes per annum
Selection Global competitive bidding, open to foreign companies
Duration Seven years from award: two years to build, five years of incentives
Cabinet approval 26 November 2025
Notification 15 December 2025
Request for proposal 20 March 2026; pre-bid conference 7 April 2026
Bid deadline / technical opening 12 August / 13 August 2026
Bids received 20

The word “integrated” carries the weight. A beneficiary must go from rare-earth oxide through metal and alloy to sintered magnet, not simply import Chinese magnet blocks and machine them. That is deliberate: India has rare-earth reserves and IREL already produces oxide from monazite sands, but the metal-making and sintering steps have never been done at commercial scale here, and those are precisely the steps China dominates with over 90 per cent of world capacity.

Who is bidding

The Ministry has named ten of the 20 bidders. They fall into three groups.

Bidder Background
Larsen and Toubro Engineering conglomerate; no magnet experience but deep process-plant capability
Coal India State miner diversifying into critical minerals
Attero Recycling Noida e-waste and lithium-battery recycler with rare-earth recovery claims
Lohum Magnets and Energy Solutions Battery-materials company that announced a magnet arm in 2025
Neo Performance Materials (Singapore) Global magnet and rare-earth processor with plants in Estonia, China and Canada
Proterial (India) Indian arm of the former Hitachi Metals, a leading NdFeB magnet maker
20 Microns Gujarat industrial minerals company
Prozeal Green Energy Solar EPC company
ReNew Renewable-energy producer
Shankaranarayana Constructions Infrastructure contractor

Neo and Proterial are the two with proven sintering know-how, and their presence is what gives the scheme a realistic chance of producing motor-grade magnets within the two-year gestation period. The Indian conglomerates bring capital and site readiness. Financial bids are still to be evaluated and the Ministry has not given a date for letters of award.

What 6,000 tonnes buys, and what it does not

Six thousand tonnes a year is about 2 per cent of world NdFeB output, but it is enough to cover India’s entire current EV, wind and appliance demand with room to grow. The catch is time and feedstock. Plants awarded in late 2026 will not produce until 2028 at the earliest, so the 2027 model year still runs on imports. The scheme also covers magnets, not the mining and separation of the heavy rare earths that go into them; India’s monazite-derived oxide is rich in light rare earths but short of dysprosium, so beneficiaries will still need to import some heavy rare-earth feedstock or use grain-boundary-diffusion techniques that cut its use. Automakers, for their part, are working on both fronts: Bajaj’s light-rare-earth motor redesign, and the government’s parallel testing of magnet-free motor designs that Deccan Herald reported in 2025.

For buyers the practical implication is price stability rather than price cuts. Magnets are a small share of a scooter’s bill of materials, well under 3 per cent, so local supply will not make EVs cheaper. What it does is remove the risk of the 2025 stoppages recurring, which in turn matters for the fuel-efficiency and sales-quota debates we covered in our explainers on CAFE-III norms and EV super credits and on whether India should adopt a ZEV mandate. A mandate that forces EV volumes is only credible if the motor supply chain cannot be switched off from Beijing.

How it fits with the rest of EV industrial policy

The magnet scheme is the fourth leg of a stool. The ACC battery PLI (Rs 18,100 crore) funds cells; the PLI-Auto scheme (Rs 25,938 crore) funds EV components and vehicles with domestic value-addition thresholds; PM E-DRIVE (Rs 10,900 crore, later raised) funds demand and charging, whose current status we tracked in our report on whether the PM E-DRIVE subsidy is still available. Motors were the gap: the PLI-Auto scheme requires 50 per cent domestic value addition, and a motor whose magnet is imported struggles to meet it. Local magnets make it easier for scooter makers to qualify their motors as Indian content, which raises the PLI payout on every vehicle sold.

Sources & Further Reading

FAQ

What is the rare earth permanent magnet scheme?

A Rs 7,280 crore central scheme, approved in November 2025, to set up 6,000 tonnes a year of integrated sintered NdFeB magnet manufacturing in India through up to five beneficiaries chosen by global bidding. It pays Rs 6,450 crore in sales-linked incentives over five years and Rs 750 crore in capital subsidy.

Why do electric scooters need rare earth magnets?

Their permanent-magnet motors use neodymium-iron-boron magnets, usually with dysprosium or terbium, to stay strong at operating temperature. These magnets make the motor smaller, lighter and more efficient than a magnet-free design.

Who has bid for the scheme?

Twenty companies submitted bids by 12 August 2026, including Larsen and Toubro, Coal India, Attero Recycling, Lohum, Neo Performance Materials of Singapore, Proterial India, 20 Microns, Prozeal Green Energy, ReNew and Shankaranarayana Constructions. Financial bids are still being evaluated.

When will Indian-made magnets reach EVs?

The scheme allows two years to build integrated plants after award, so the earliest commercial output is 2028. Until then Indian EV makers continue to rely on imported magnets, mostly from China.