Mercedes, BMW step up response to China export curbs

MUNICH: Automakers in the US and Europe raised concerns about China's export controls on rare earth metals, as Beijing's move threatens to disrupt global car production.

Mercedes-Benz Group AG and BMW AG are in talks with suppliers to prevent shortages of components containing these materials, with the former discussing stockpiling certain items.

Meanwhile, Ford Motor Co. said it's taking longer for some parts to get through China's approval process for exporting rare earths, with shipping costs rising in some cases.

"It just puts stress on a system that is highly organized," Ford Chief Financial Officer Sherry House said Wednesday at an industry conference in New York.

The controls mean automakers must find alternative parts or ways to source supplies, she said.

Ford had to idle a factory in Chicago producing the Explorer sport utility vehicle for an entire week last month due to a rare earths shortage.

While its car factories are operating as usual, parts of BMW's supply network are affected by China's curbs, a spokesperson said, without giving further detail.

In response to tariffs from US President Donald Trump, China in April imposed controls on rare earth exports that threaten to disrupt the global supply of key materials widely used in high-tech manufacturing, from electric vehicles to weaponry.

Automakers need rare earths such as terbium for motors in electric cars, while others are used in combustion engine vehicles, such as in sensors and electronic systems.

China dominates the market for processing these materials.

The potential squeeze on rare earth magnets is drawing comparisons to the global semiconductor crisis that disrupted automotive production in the wake of the coronavirus pandemic.

"It's a major issue for the industry," John Murphy, a Bank of America auto analyst told Detroit-based reporters Wednesday at an Automotive Press Association event.

"Like other supply shocks, they're very industrious and are going to find work-arounds fairly quickly."

While unlikely to force immediate production stoppages, he said that "over time, if it's not solved, it's going to become a very expensive problem."

The industry has lobbied the Trump administration to prod China to resume shipments of rare earth materials such as dysprosium and critical components made from them like magnets.

'Matter of Weeks'

"Without swift intervention from the administration, we anticipate this to impact and potentially interrupt US auto production in just a matter of weeks," the heads of automaker trade group Alliance for Automotive Innovation and MEMA, the largest vehicle supplier association, said in a joint letter dated May 9 and addressed to several Cabinet secretaries.

While carmakers don't typically purchase rare earth metals directly, major suppliers use them in electric motors and hybrid systems delivered to automakers.

"If you come into such a risk situation, then we're in constant, constant dialogue with our suppliers," Jörg Burzer, Mercedes' head of production, told reporters Wednesday at a plant in Rastatt, Germany.

"Naturally, we discuss with them what the best tool is for risk management, so physical buffers play a role."

Elsewhere, Rivian Automotive Inc. has been working to educate the Trump administration on the complexity of supply chains, including how challenging it would be to process rare earths in the US, Chief Executive Officer RJ Scaringe said at the UBS conference.

"These are 24-hour days, full-court press. We have a giant team on this," Scaringe said.