India’s electric vehicle (EV) revolution is not just about batteries and motors — rare-earth and strategic mineral stocks are emerging as key enablers in this transformation. With growing demand for high-performance magnets and critical minerals, companies on the supply side may become structural beneficiaries. Below, we explore why rare-earth equities deserve close attention in the context of India’s EV ambitions.
Why Rare Earths Matter for EVs
- High Material Intensity: EVs consume significantly more minerals than internal combustion engine (ICE) vehicles. According to Equitymaster, a typical EV uses six times more minerals than an ICE vehicle, including copper, aluminium, zinc, silver, lithium, cobalt, nickel and graphite.
- Magnet Dependency: Many EV motors rely on permanent magnets made from rare-earth elements such as neodymium and praseodymium. These are vital in creating compact, efficient traction motors.
- India’s Supply Vulnerability: Despite having estimated reserves of 6.9 million tonnes of rare-earth minerals, India lacks advanced processing capacity and remains dependent on foreign (especially Chinese) supply chains.
- Strategic Risk from China: With China controlling a dominant share of rare-earth processing capacity, recent export restrictions have heightened supply-chain risks for Indian EV players.
Key Indian Players to Watch
Based on the Equitymaster analysis, here are a few listed companies that stand to gain from the rare-earth and EV nexus.
Hindustan Zinc Ltd (HZL)
- Primarily a zinc producer, HZL commands ~75% of India’s zinc market.
- Zinc is used in EV battery casings, die-cast structural parts, and thermal-management modules. Demand in these applications is expected to grow 6–8% annually.
- HZL also produces silver, another metal increasingly used in EV electronics and charging systems.
- Financially, it has posted healthy growth, with sales and net profit growing at CAGRs of approximately 13% and 9% over five years.
Sterling Tools
- Specialises in precision-engineered, high-strength fasteners vital in EV assemblies (battery packs, thermal modules, drivetrain).
- A significant portion (~42%) of its revenue already comes from the EV space, and this segment is growing rapidly (~60% YoY).
- Its profitability is strong: net profit has grown at a CAGR of 32% over three years, and 13% over five.
Coal India (CIL)
- While not directly a rare-earth miner, CIL plays a critical role in EV infrastructure: India’s electricity generation depends heavily on coal, and EV charging demand may push peak power needs higher.
- It has very stable cash flows and low debt, enabling investments in pit-to-power projects and logistic enhancements.
- Over the past five years, its net sales and profits have grown at 10% and 16% CAGR respectively.
GMDC (Gujarat Mineral Development Corporation)
- Produces bauxite, lignite, fluorspar, and specialty minerals — several of which are relevant to EVs and rare-earth value chains.
- It is exploring lithium in Kutch in response to the push for domestic lithium-ion cell manufacturing.
- Importantly, GMDC is building a rare-earth value chain: mining → processing → separation → manufacturing.
- A major rare-earth processing hub is planned, aligning with India’s National Critical Mineral Mission.
- Financially, GMDC’s sales and net profit have grown at CAGRs of ~16% and ~36% over the past five years.
Structural Drivers Supporting These Stocks
- EV Scale-Up: India’s EV battery production is projected to jump from 12 GWh in FY24 to 50 GWh by 2030.
- Vehicle Growth: Annual EV production could rise from about 1.3 million units to over 6 million by 2030.
- Government Support: The National Critical Mineral Mission includes incentives to recycle and produce critical minerals, including rare earths.
- Import Substitution: Domestic rare-earth processing and magnet production are seen as essential to reduce reliance on China.
- Research & Alternative Technologies: Some Indian institutions are also working on rare-earth-free motor technologies (e.g., switched reluctance motors), though rare-earth magnets remain dominant today.
Risks to Be Mindful Of
- Processing Bottlenecks: Even though India has reserves, it lacks large-scale refining capacity. Without this, raw mining doesn’t translate into usable high-grade rare-earth materials.
- Geopolitical Risk: Given China’s dominance over the rare-earth processing sector, any further export curbs could destabilise global supply.
- Technological Substitution: Automakers may pivot to rare-earth-free motors (e.g., ferrite-based or reluctance motors) to de-risk supply chains.
- Environmental Challenges: Rare-earth mining and refining can be environmentally damaging if not regulated properly.
- Execution Risk: Building a full domestic value chain — from mining to magnet manufacturing — is capital intensive, technologically complex, and time-consuming.
Why Rare-Earth Stocks Could Be a Strategic Long-Term Play
- Rare-earth stocks offer strategic exposure to India’s EV ecosystem beyond just battery supply.
- Companies like GMDC and HZL are positioning themselves not just as commodity miners, but as key players in the critical minerals value chain.
- With government incentives, rising EV demand, and growing awareness of supply-chain vulnerabilities, these stocks could benefit structurally.
- However, investors should be cautious: the pathway from mining to processing to magnet manufacturing is fraught with challenges — environmental, technological, and geopolitical.
