US EVs Threatened by Rare-Earth Supply Bottleneck

U.S. electric vehicle sales topped roughly 1.2 million in 2024, yet policy uncertainty and financial pressures risk derailing momentum.

Beyond tax credits, tariffs and interest-rate headwinds lies a deeper industrial problem: permanent magnets. Each EV motor typically requires about one kilogram of neodymium, praseodymium and dysprosium—materials overwhelmingly processed in China. The United States currently lacks commercial-scale refining and midstream capacity for these magnet materials, leaving automakers exposed to overseas chokepoints even if consumer demand and incentives align.

China’s vertically integrated suppliers, exemplified by firms that control lithium, cathodes and magnets, have gained a cost and security advantage. U.S. efforts to build domestic capacity—publicly backed magnet projects and investments involving MP Materials, USA Rare Earth and Lynas, plus Pentagon equity injections—could shift dynamics by 2027–2028, but those initiatives are nascent and not yet reflected in sales figures.

Framing the transition as a consumer race misses the point: supply-chain sovereignty and rare-earth independence are the decisive factors. Absent significant midstream investment, policy adjustments will only scratch the surface of a structural competitiveness challenge.