Rare Earths

Germany’s Schaeffler in Rare Earths Deal to Cut China Reliance

The Schaeffler plant at Luckenwalde in Brandenburg. The company supplies bearings to carmakers such as Volkswagen, General Motors and Honda. Photo: AFP

German automotive parts supplier Schaeffler has signed a raw materials deal to ensure the supply of rare earth magnets from Europe for its burgeoning electric vehicle (EV) motor business, an executive told Reuters.

It is the first reported agreement by a European automotive sector supplier or carmaker to source rare earths within the region.

The European Union is spearheading a drive to boost domestic production of rare earths and super strong magnets used in EVs and wind turbines to cut dependence on top supplier China.

Schaeffler has agreed to a five-year deal with Norway’s REEtec to supply rare earth oxides from 2024, said Andreas Schick, chief operating officer of Schaeffler.

He declined to provide the value of the transaction, which is due to be announced on Wednesday. “We are transforming into an e-motor supplier and are ramping up significantly,” he said in an interview.

“Therefore on the rare earth side we need competent partners, not only going through the standard supply chain through China, we need a local supply chain for Europe.”

Automakers planning on massive jumps in EV production have agreed contracts in recent years with miners for battery raw materials such as cobalt, lithium and nickel, but such deals have been limited in the rare earths sector.

General Motors in December reached an agreement to source rare earth magnets in the US, but this is the first reported one in Europe.

The European Union, Britain and the United States are scrambling to build domestic rare earth and magnet industries to wean themselves off China, which supplies 98% of permanent magnets to Europe.

Schaeffler – a leader in bearings that it supplies to automakers such as Volkswagen, General Motors and Honda – usually buys manufactured components from subcontractors referred to as Tier 2 suppliers.

Reuters, with additional editing by George Russell

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George Russell

George Russell is a freelance writer and editor based in Hong Kong who has lived in Asia since 1996. His work has been published in the Financial Times, The Wall Street Journal, Bloomberg, New York Post, Variety, Forbes and the South China Morning Post.