Why diversification is becoming a strategic priority for global automakers

Automakers are entering a pivotal moment in the electrification era. As global trade conditions tighten and supply risk intensifies, the dependence on rare earth elements (REEs) has become one of the sector’s most pressing vulnerabilities. Electric motors sit at the centre of this challenge, with permanent-magnet motors still dominating global EV production. 

Today, mainland China remains the core source for REE mining, refining, and processing. Recent export restrictions have highlighted how exposed OEMs are to policy shifts and geopolitical pressures. This disruption is accelerating a decisive shift: building resilient value chains for rare earth-free motor technologies.

For the automotive industry, this is now a strategic imperative—not only to stabilise costs but to protect long-term production planning, strengthen supply security and support global EV adoption. 

Why rare earth-free motors are gaining momentum

OEMs are reassessing their motor strategies with unprecedented urgency. Externally-excited and induction-based technologies sit at the forefront of this shift, supported by new investment, supply partnerships and internal development programmes.

Recent industry actions reflect a clear pivot:

• Renault has ended its joint E7A rare earth-free motor programme with Valeo and is now sourcing stator components from China while preparing to manufacture the remaining elements in-house. The company is targeting full rollout by 2028.

• Honda’s Xcelerator Ventures has invested in Enedym, a Canadian developer of switched reluctance motors (SRMs) that require no rare earth materials.

• Stellantis has partnered with Niron Magnetics to advance iron-nitride-based “clean earth” magnets—another pathway to REE-free permanent-magnet machines. 

This acceleration is supported by market demand. S&P Global Mobility forecasts that global e-motor requirements will grow at a 7% CAGR between 2025 and 2037. While rare-earth-based motors still represent 94.7% of the light-vehicle market in 2025, REE-free architectures are expected to nearly triple their market share by 2037. 

Technologies shaping the next generation of electric motors

Current-excited wound rotor synchronous motors (EESM)

Among all REE-free options, EESMs remain the strongest contender for OEMs seeking performance without reliance on permanent magnets. Major adopters include BMW, Renault, Volkswagen and Nissan, while suppliers such as Vitesco (Schaeffler) and BorgWarner have active development programmes.

“More suppliers are beginning to develop EESMs to meet this growing demand,” notes Kartik Ganesh, Principal Analyst, S&P Global Mobility. 

Induction motors
Induction motors are re-entering the spotlight as OEMs expand their motor portfolios. Tesla remains the most notable user today, but by 2030 Volkswagen, General Motors and others are expected to integrate induction machines into future platforms. Europe and North America are particularly strong regions for EESM and induction motor adoption. 

A global environment that continues to shift

Mainland China’s REE export policies remain fluid. After a major dip in magnet exports from May to September 2025, shipments to the United States rebounded by over 56% in October, reflecting a short-term easing of restrictions. Yet upstream controls remain tight, with licensing used as a strategic instrument to manage global supply. 

This uncertainty has pushed OEMs to accelerate investment in:

• REE-free motor platforms including EESM, SRM and induction designs

• Magnet recycling and material recovery

• Supplier diversification and dual-sourcing

• Domestic and regional production capabilities

• Government-backed materials initiatives such as the DOD–MP Materials “10X Facility” and Idaho National Lab’s processing pilot in the US

The result: a more distributed, more resilient value chain that reduces exposure to single-market concentration.

What this means for the industry

Automakers that move now to reorganise their motor strategies will be best positioned to manage:

• Cost volatility driven by raw material fluctuations

• Geopolitical disruption affecting upstream REE supply

• Manufacturing certainty as EV volumes continue to rise

• Sustainability expectations from regulators and consumers

The companies that diversify designs, deepen supplier partnerships and secure stable material flows will lead the next phase of EV competitiveness. Rare earth-free motor technology is no longer a future ambition. It is a present-day necessity—and an opportunity to build a more secure, scalable and sustainable supply chain for the decade ahead.

Priyanka Mohapatra

Senior Research Analyst, S&P Global Mobility

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