Caught in the middle of the U.S.-China trade war is a Chiclet-size magnet that is vital to every new electric vehicle on the road.
The magnet is made with dysprosium. Atomic number 66. A rare-earth mineral with a silver metallic luster. More than 90% of refined dysprosium comes from China , and it is used in magnets that power everything from medical equipment to EV motors.
In its retaliation against U.S. tariffs, China slowed exports of several rare-earth minerals and magnets this month, setting off a panic among U.S. automakers.
“You cannot build the motor without the magnet,” said a senior automotive executive. “If we want electric-vehicle production to continue to happen in the United States, this has to be solved.”
Under the new Chinese rules, U.S. companies have to apply for a license to export the minerals from the Asian country, a monthslong process that leaves carmakers uncertain if they will be able to replenish their supplies of this precious material.
While President Trump has said that his administration is actively talking with Beijing on trade , it couldn’t be determined whether such discussions would lead China to soften its stance on these particular exports.
Tesla Chief Executive Elon Musk recently said a lack of the magnets could derail plans to build the Optimus humanoid robot at the company’s factory outside Austin, Texas.
“Hopefully, we’ll get a license to use the rare-earth magnets,” Musk said on the company’s earnings call this month. “China wants some assurances that these are not used for military purposes, which obviously they’re not.”
The magnets, also known as permanent magnets, are used in the spinning portion of the electric-vehicle motor that turns the wheels. While Tesla’s EV motors contain these rare-earth magnets, the company said it has been working for years to develop a version that doesn’t use them.
Dysprosium is in many ways the archetypal rare-earth mineral. It was discovered in 1886 by a French chemist, who named the new element after the Greek word for “difficult to obtain.” While dysprosium is mined in China, Myanmar, Australia and the U.S., transforming it into a usable material is a costly multistep process and most of the expertise for refining the element is concentrated in China.
Analysts estimate that companies have stockpiled enough magnets and rare-earth minerals to last them until the end of May. Nearly 900,000 EVs were built in the U.S. last year, according to U.S. government data and the research firm Motor Intelligence.
Already, prices for these elements are skyrocketing. The price of terbium, another rare-earth mineral used in magnets, rose 25% this month, said Neha Mukherjee , industry analyst at Benchmark Mineral Intelligence.
“Rare earths are used in almost everything that turns on,” said Gracelin Baskaran , a director at the Center for Strategic and International Studies, a Washington, D.C., think tank. “The primary use of rare earths is permanent magnets.”
The minerals are abundant in nature but difficult to refine into their pure form. They are the essential building blocks of much of modern technology, forming parts of everything from satellites and jet fighters to CT scanners and iPhone speakers. Automakers said they are currently combing through their catalogs to find affected parts. They are finding them in dashboard screens, brakes, gear shifters, windshield wipers and even some headlights.
“We have one particular supplier who uses a magnet in a particular component in the vehicle, a seat-belt buckle,” an automotive supply chain manager said. “Another supplier does not.”
China is the source of over 90% of the world’s supply of rare-earth minerals, and thus far no other country has been able to produce them at the same scale and cost, according to experts.
Baskaran has worked to draw attention to the national-security risk posed by China’s near monopoly on rare-earth minerals for years, and now finds herself in the spotlight as companies and policymakers scramble to find a response. “I never thought I would be cool,” said Baskaran, who holds a doctorate from the University of Cambridge.
The potential chaos related to the slowing of one link in the automotive supply chain illustrates how dependent the modern car industry is on global trade. It also shows how efforts by the Trump administration to reverse decades of globalization is exposing holes in America’s manufacturing industry that can’t easily be filled.
In many cases, carmakers have been able to find parts that don’t employ rare-earth materials, but there are few good alternatives for use in electric-motor magnets.
One option would be to revert to an older technology that uses electromagnets, which once powered early versions of Tesla’s Model S luxury sedan. The company ditched those motors because rare-earth magnets were more efficient, allowing EVs to squeeze more miles out of a charge.
America’s disadvantage is twofold: There is currently only one large-scale dysprosium mine in the U.S., and processing facilities are only now coming online. The mine, in California , wouldn’t be able to meet the needs of American manufacturers. Many more such operations would be required to wean the car sector from China’s supply.
The development of a new mine takes an average of 29 years in the U.S., according to a report by S&P Global Market Intelligence. The bigger problem is that the U.S. can’t currently separate dysprosium from surrounding rock.
China’s head start on mining and extracting the precious elements makes it difficult to build alternative sources. “A mine in China, to produce from an ore to oxide, costs around $11 to $15 a kilogram,” said Mukherjee, of Benchmark Mineral Intelligence. “For a mine in Brazil, it’s approximately $35 to $40 a kilogram. It would be even higher in the U.S. or Australia.”
There also are key parts of the refining process known only to Chinese companies, said Baskaran. “It’s a permitting problem, a know-how problem and a technical problem,” she said.
Write to Sean McLain at sean.mclain@wsj.com
