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Why Electric Car Manufacturers Are In A Panic, And How China Holds The Key
"If we want electric-vehicle production to continue...in the United States, this has to be solved." These chilling words of a senior automotive executive, brought to us by Wall Street Journal reporter Sean McLain in his April 26, 2025, article, Dyspro-what? Why An Obscure Element Has The EV Industry In A Panic, summarize why President Trump has been investing money, time and attention to China's stranglehold on rare earth minerals. Beginning with President Clinton, and until President Trump, China has secured and maintained more than 90 percent of the world's rare earth minerals. Rare earths, or REEs, are a set of 17 elements essential to manufacturing the most critical products in the four most important U.S. industries: high-tech, pharmaceuticals, defense and energy. It's not just electric vehicles at stake for the United States and the West, but "green" technology depends on REEs. Consumers depend on REEs in hi-def, flat-screen televisions, smart phones and watches and laptops. American armed forces equipment and weaponry, such as satellite systems, night vision goggles, guided missiles, fighter jets and SONAR systems, are dependent on REEs. And of note, the REEs China now holds are critical in refining petrolium into gasoline and other sources of energy--energy needed to run cars, refrigerate food, heat homes in the summer and cool them in the winter. Again, it is China that mines, processes and produces 90 percent of the world's REEs. The United States--and the West--currently depend completely on China for these REEs.
How Exactly Did We Get To This Point? In short, the U.S. gave to China all its magnetics business, resources and technological know-how. Discovered in Sweden's Ytterby mine, near Stockholm, in 1787, this black mineral containing rare earth minerals received no attention to speak of for nearly 150 years. However, at the outset of World War II, scientists tried using REEs to purify uranium and discovered how to split the atom to make, and detonate, the atomic bomb. Thus, scientists saw the obvious importance of REEs. Shortly thereafter, the hunt was on for more of this material. An enormous mine was opened in REE-rich Southern California in the mid 1950s. This mine, later known as the Mountain Pass California Mine, became proficient at providing the material and extraction methods necessary to control this important natural resource. REEs achieved little commercial notice through the 1960s, except for the discovery of color television, though still controlled completely by the United States. It was then General Motors caught interest in REEs, secured Pentagon grants and discovered HREEs--Heavy Rare Earth Elements--which could be transformed into a new category of magnets called permanent magnets. Permanent magnets were soon in demand due to their superior power compared to first generation magnets. U.S. industries immediately began using them for speakers in stereos, earphones, televisions, computers, cars, to refine fuel and for better MRI imaging. The demand for these revolutionary magnets took attention and resources away from GM's core competency which was, of course, making cars, so they decided to spin off the magnetics business and creeate a separate magnetics division, Magnequench, to manufacture its magnets. Magnequench solidified its international control of the production and sale of permanent magnets until 1994.
From here, it gets ugly.
GM made a puzzling decision in 1995. It sold its lucrative magnetics subsidiary for only $70 million to a consortium headed by Archibald Cox, Jr., son of the Watergate prosecutor. Cox was not acting alone, but with two Chinese state-owned metals firms: San Huan New Material, and China National Nonferrous Metals Import and Export Company (CNNMIEC). The latter had been pestering GM to sell Magnequench since 1993, but had been unsuccessful until Cox appeared in the picture. The successful deal had the two Chinese firms controlling at least 62 percent majority of Magnequench shares. San Huan New Metals chairman was Mr. Zhang Hong, son-in-law of former Chinese leader Deng Xiaoping, who spearheaded the "Super 863 Program" to develop and acquire cutting-edge technologies for military applications. The other Chinese investor in Magnequench, the CNNMIEC representative, was another Deng Xiaoping son-in-law. The deal received little if any media attention at the time. The relatively small asking price for a company that provided a treasure trove of advanced technology designed for military and commercial uses going to a partially foreign owned company would seemingly create serious concerns and careful investigation by then President Clinton, but it did not.
In fact, the U.S. government permitted the Chinese to simply walk in and take over a significant U.S. high-tech firm. Through a 1988 federal law from the Reagan era, President Clinton had the power to block any financial transaction made between an American and a foreign-owned company if credible evidence the foreign interest exercising control might take action that threatened to impair national security. However, Clinton, or more precisely, CIFUS--the Committee on Foreign Investment In The United States--did not find any "credible evidence." Its only requirement for the deal to go through was that Magnequench's Chinese companies could not remove Magnequench's equipment or jobs from the United States for a period of ten years. The sale went through and, shortly after the Chinese took over, Magnequench's magnet production line was duplicated in China and the U.S. plant was closed, ostensibly to "see if it (the China operation) worked," according to one employee. The employee added, "I believe the Chinese entity wanted to shut down the plant from the beginning."
And it gets even uglier. Check here for more later.
In retaliation to recent U.S.-imposed tariffs, China suspended the export of critical minerals and rare earth materials, including magnets.
"Shipments of the magnets, essential for assembling everything from cars and drones to robots and missiles, have been halted at many Chinese ports while the Chinese government drafts a new regulatory system," according to the New York Times.
China's dominance of rare earths--up to 92 percent or more are processed in China--is its trump card in a renewed trade war with the United States. The minerals are used to power everything from iPhones to electric vehicles, defense systems to green systems like wind turbines.
"We have been purchasing permanent magnets and permanent magnetic tooling for decades," said Bill Klaus, president of Cincinnati, Ohio-based AEC Magnetics. "The one thing I can tell you, from speaking with our China suppliers, is no one can accurately predict how this will play out. It is anyone's guess how this will affect price and availability of permanent magnets." History shows, Klaus said, China can be bold when weilding the strength of its rare earths dominance. "China has shown it is unpredictable, and it will use rare earths to its geopolitical advantage."
Klaus shared some historical highlights: "In the early 2000s, China occasionally squeezed the markets with pricing and import limits. But China was emboldened in 2010 when a Chinese trawler and Japanese Coast guard vessel collided in contested waters. It retaliated against Japan by banning all Japanese imports of Chinese rare earths. All Japanese-manufactured goods containing permanent magnets were affected, which of course affected noot only Japan, but the Europeann Union and the U.S. which imported Japanese-manufactured goods. The European Union and U.S. appealed to the World Trade Organization for relief. The WTO ruled against China; China lost its appeal and lifted the sanctions, but did it did get revenge. Investors worldwide scrambled to secure capital to open new avenues of rare earths mining and production outside of China. As investments grew, China pulled the rug out from the entire industry, slashing rare earths prices. Nervous investors withdrew, unwilling to risk investment in a volitile sector dominated by Chiina. That one, swift move also closed the West's only rare earths facility in Mountain Pass, California, and, until President Trump, most all investors wouldn't touch rare earths."
China's rare earths dominance has been on President Trump's radar since his first term. He bolstered domestic production at the once-shuttered Mountain Pass Rare Earths Mine, issued executive orders to boost mining and production through streamlining permits, financing loans and providing investment support. The Financial Times reports President Trump has signaled his intention to issue an executive order allowing the U.S. to stockpile critical rare earth materials mined from the Pacific Ocean floor, in case of any conflict that might arise and constrain imports.
Rare earth minerals, which are not rare, can be found virtually anywhere, but it takes an enormous amount of material to gain enough to process. The process itself is harsh, beginning with mining such a huge magnitude of the earth. Extracting the elements and compounds requires massive chemical treatments. This purifies the material and creates oxides and salts so that metallization, the step that transforms the oxides into rare earth metals, can take place. Depending on the application, these metals are combined with other elements to produce a variety of rare earth alloys. Finally, the rare earth magnets are sintered, or bonded, into blocks and then cut, coated or otherwise manufactured into functional permanent magnets.
For the United States and the West, it is critical all these steps be done domestically. "China's domination in rare earths affects the world. If no one can mine and process rare earths, everyone will be dependent on China for rare earths. Defense, green technology, cell phones, computers, cars, generators and so many other things we depend upon will be basically in their hands unless a significant, new, way forward can be forged, and soon."
Follow Bill Klaus, and AEC Magnetics, at www.aecmagnetics.com. Bill would love to discuss permanent or electromagnets with you. Call (800) 635-3954 to discuss your application. If it's magnetic...it's AEC!
Lowering the threshold for automation--especially for small- and medium-sized companies--is the name of the game in 2025. "This is the year for those who've shied away from automating due to cost of investment, disruption, integration concerns and other issues," said Bill Klaus, president of AEC Magnetics. Optimizing existing production will be big this year. This is due to the the upswing in more 'plug-and-play' -type options. These are affordable solutions that minimize disruption and integration issues."
"We have been magnetics specialists for automated manufacturing since 1961, and we've seen this cycle. Increases in custom solutions reveal new scalable and flexible solutions that, taken together, are more of a drop-in component rather than custom solution. Because we are not re-inventing the entire automation process, the solution is affordable. This synergy has gone on for decades. The products and processes we design in the custom arena always benefit smaller-scale solutions at some poin. This year is that point."
These more scalable solutions offer a quick way to optimize manufacturing with immediate impact. AEC Magnetics solutions can be inserted directly to existing production with minimal hassle and minima impact. "For those wanting minimal change, this is a game changer," said Klaus. "Our core competency is design to build automation solutions, and we love starting at 'design,' for any automation process, but this year we are alredy seeing companies new to industrial magnetics invest in scalable automation. It is cost-effective, not disruptive and gives them a competitive edge.
Flexibility will be key in 2025. "Modular production systems in particular will be big this year," Klaus said. "Enabling or disabling all or part of a production line--quickly--due to demand, economics or design changes will absolutely provide faster return on investment. "The reliability of our equipment is superior. My 43 years of experience as magnetics specialist for automated manufacturing is unmatched. I enjoy solving automation challenges and providing efficiency and value. I would love to talk to you about your application.
Bill Klaus, president of AEC Magnetics, has spent 42 years in automated manufacturing. His company was founded in 1961 specifically to provide magnetic solutions for automated manufacturing. Bill took a few minutes away from designing custom power supplies this morning to talk about trends he expects to see in the new year.
There is a lot of new technology being touted in manufacturing. Would you say that embracing new technology will be the biggest automated manufacturing trend in 2024?
While the new technology is exciting and will certainly be a welcome manufacturing tool, I believe the biggest trend in automated manufacturing next year will be the substantial labor challenge. 2023 saw about 10,000 retirees a day. This is a mass exodus of experience and talent. Add to that the shrinking pool of available workers, and the impact on manufacturing is enormous. I've read one projection that by 2030 there could be more than 2 million jobs unfilled. These numbers iindicate a substantial workforce gap. AEC Magnetics automated solutions bridges that gap by automating manual, repetitive and dangerous tasks. We have known for years our automation equipment mitigates high turnover in production, makes the manufacturing floor safer and allows current employees to transition to more skilled roles, or frees them up for other jobs in the shop. I can tell you this is definitely how it works successfully. I work directly with the manufacturers to design and build solutions that have a low barrier to entry. The operators readily adapt. It is a win-win for the employee and employer.
Do you see 2024 bringing large capital investments to AEC Magnetics?
What we have seen in 2023, which will continue in 2024, is a continuing, gradual evolution in industrial automation. This has actually been going on for 30 years or more. There have been times when high through-put manufacturing required big, complex investments and technology, but we think we will continue to see an increased demand for automation solutions that are simple, affordable and will ease the labor shortage. These solutions are often, if not always, complimentary or companion-type technologies that enhance manufacturing.
What other trends do you see in automated manufacturing?
The perception that automation will displace jobs and render humans unecessary will decrease. Humans will always have a place in manufacturing. Fewer than one in ten manufacturing jobs are completely automated; those that are typically open up other opporunities instead of replacing employees.
In 2024, I see automation--due to the labor shortage--becoming more of a "need to have" rather than a "nice to have." The benefits of AEC automated manufacturing solutions will be very easy to see in the challenging economic conditions predicted for 2024.
Any other thoughts?
There is absolutely game-changing technology coming in 2024. AI, for instance, Do-It-Yourself automation, MAP programs for integrating engineering sosftware and modular hardware--all of it will become more of a part of the landscape in 2024. AEC, however, sees the trend continuiing for scalable automated solutions that integrate seamlessly into a manufacturing process rather than an enormous transition to a completely automated shop. This is exactly what AEC does.
Please, call me, Bill Klaus, and I will take all the time necessary to listen to your automation challenges and work with on on solutions, (800) 635-3954.
As China trade tensions mount this week, there is yet another reason to seriously consider locking in permanent magnetics prices and availability right now. Saturday, February 10, is Chinese New Year. (Happy Year of the Dragon!). Unlike Western New Year celebration, during Chinese New Year holiday, all factories close and employees go on holiday for at least two weeks--some up to 40 days! Everybody goes, the doors are shuttered and this includes management, production supervisors, everyone.
In the decades AEC Magnets has been doing business with our excellent China suppliers, we do know that when the factories reopen after the holidays, it is common for the factories to reopen in phases. In other words, workers don't all come back at the same time and it's business as usual. In fact, many workers do not come back at all, forcing factories to replace them quickly. Not great for the quality on the production lines.
We at AEC advise ordering permanet magnets, neodymium, ceramic and all permanent magnets right now if you want them in the first quarter of 2024. Here's why:
- You will avoid delays due to factory shut down and shipping.
- You will avoid delays in replacing inferior products and having your order re-run if we do not approve of the quality.
- You may avoid price increases due to inflation and potential increase in cost of components.
Chinese New Year is also called Spring Festival, again, on February 10 in 2024. The week of Chinese New Year is called Golden Week. Starting 15 days before Chinese New Year and lasting 40 days is Chunyun, or the Spring Festival travel rush. It is thought to be the largest annual human migration in the world., with almost 3 billion passenger journeys, most by train. During this time, factories are closed and then slowly re-open. Each year, we order early to avoid disappointing our customers, but it is not always possible to anticipate customer needs, pricing and quality, so we recommend ordering as soon as possible.
Browse the thousands of permanent magnets we have here, in stock, ready to ship now. Call us at (800) 635-3954, or email This email address is being protected from spambots. You need JavaScript enabled to view it. and remember, If it's Magnetic...It's AEC!