*

Local production to take 1-2 years, government official

says

*

Need to create independent supply chain, official says

*

Mahindra open to partnering on local production, source

says

*

Mahindra, Minda's final plans depend on government

incentives

By Aditi Shah and Neha Arora

NEW DELHI, July 10 (Reuters) - Indian auto company

Mahindra & Mahindra and parts maker Uno Minda are looking to

make rare earth magnets locally to cut reliance on China, as New

Delhi draws up incentives for production of the critical

components, company and government sources told Reuters.

China, which produces around 90% of the world's rare earth

magnets, put restrictions in April on their export, and while it

has restarted some supplies to the United States and Europe,

Indian companies are still awaiting clearance from Beijing.

The disruption has prompted Prime Minister Narendra Modi's

government to look at building up stockpiles of magnets and

offering incentives for the domestic manufacture of the

components critical to making electric vehicles and electronics.

"Some companies have shown interest in investing or setting

up rare earth magnet production, including Mahindra," said a

senior government official in Modi's administration.

"It will take a year or two to have our own production ...

But we have to find ways to be independent," he said.

During a meeting in June with India's ministry of heavy

industries, Mahindra said it is open to partnering

with a company to make magnets or entering a long-term contract

with a supplier producing them locally, according to one of the

sources.

Mahindra, which recently launched two electric SUVs, has

captive demand for magnets and has indicated that the investment

to make them locally is not that high, said the source.

Uno Minda, supplier of parts to major carmakers in

India like Maruti Suzuki, also expressed interest in

local magnet manufacturing at the same meeting, two of the

sources said.

Maruti has already warned of production delays amid the

disruption of rare earth magnet supply from China.

Component maker Sona Comstar, which supplies gears

and motors to companies including Ford and Stellantis ( STLA )

, was the first Indian company to show interest in

making magnets domestically, it told Reuters in June.

Mahindra declined to comment. Minda and the ministry of

heavy industries did not immediately respond to a request for

comment.

A final decision by the two companies on the timeline of any

investment into making rare earth magnets will depend on

incentives offered by the government and the availability of raw

materials, two of the sources said.

Availability of raw materials in India, which has the

world's fifth-largest reserves of rare earth minerals, is not

the biggest challenge. But the mining of them is.

The government controls rare earth mining through its entity

IREL, which had an output of about 2,900 tons of rare earth ores

in 2024. Most materials are used by the country's atomic and

defence units, while some are exported to Japan.

But after the recent disruption of China's exports, IREL has

plans to stop exports and expand its domestic mining and

processing.

JSW Steel has expressed an interest in mining rare

earths in India but it would need government approval, two

sources said, adding that mining, unlike magnet production,

could take several years.

JSW declined to comment.

India is also looking to secure raw materials from

elsewhere. Last December, IREL sent a team to Myanmar to study

local rare earth resources and Modi's government is working with

five Central Asian countries to jointly explore the mining of

critical minerals.