Schaeffler strikes rare-earth deal from European supplier

22 April 2022

electric motors

German automotive supplier Schaeffler has inked a five-year raw materials deal with Norwegian manufacturer REEtec AS to guarantee the supply of rare earth magnets from Europe. The company relies on the raw materials for magnets used in electric motors, with the agreement allowing it to become less reliant on China.  

Schaeffler looks to be the first European automotive company to source these rare earths from Europe. China currently delivers 98% of rare earth elements to Europe. The EU is eager to bolster domestic production of rare earths used in electric vehicles (EVs) to cut dependence from Asia.

The deal will see Schaeffler buy rare earth oxides from REEtec to build electric motors for hybrid modules, hybrid transmissions and all-electric axle drives. The supply agreement will begin in 2024, allowing the automotive supplier to manufacture strong permanent magnets.

Financial details were not disclosed.  

Sustainability along supply chain

REEtec is planning to start the construction of its first industrial separation plant located in Norway. The company hails itself for its environmental approach to process rare earths. Its rare-earth separation process relies on 100% hydro-electric energy sources, with a clear focus on recovering and re-utilising all consumables.

REEtec has been separating rare earths on an industrial scale since 2019, with its new plant processing rare-earth carbonates produced by Vital Metals in Canada. The new deal will also help Schaeffler move towards climate-neutrality by 2040 as procuring rare earths closer to home will cut emissions in the automotive supply chain.

‘Rare earths play an important role in the automotive and industrial segments,’ said Andreas Schick, Schaeffler COO. ‘Schaeffler is focusing on achieving sustainability along the entire value chain and is systematically gearing its activities to the use of materials produced cleanly and sustainably. Through this partnership, we are also securing our supply of neodymium iron boron magnets for electric motors.’

Electric motors and e-mobility

The German company has been involved in the large-scale production of electric motors since 2021, providing power classes ranging from 20kW to more than 300kW. As a leading global supplier to the automotive industry, Schaeffler is transforming into an electric-motor supplier and wants to boost production.

The agreement will now allow the company to establish a local supply chain for rare earths, prices of which have been surging in recent months due to geopolitical tensions and wider supply-chain issues. Mining for rare earths is concentrated in only a few regions, most notably in China, which could reduce exports in the future to meet its own domestic demand. This could cause automotive suppliers and carmakers further headaches, especially as the shift to electric cars relies on rare earth metals.

‘We are transforming into an e-motor supplier and are ramping up significantly, said Schick in an interview with Reuters. ‘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.’

With Schaeffler increasingly focusing on electromobility, it last year announced plans to shut down a German site in Luckenwalde, which heavily focuses on producing parts for internal-combustion engine vehicles.