The conglomerate Larsen & Toubro Ltd. intends to begin the production of rare earth magnets in India. This move aligns with the government's initiative to reduce import dependence and lessen China's control over this crucial industrial component.
According to sources familiar with the matter, the company is preparing an application to participate in a government incentive program that provides funding of 7,280 crore rupees ($764 million) for the manufacture of such magnets. As the discussions are confidential, sources requested anonymity. To enter this sector, known for its high engineering precision, L&T will need to find a technological partner with the necessary experience.
Currently, the program has received fifteen applications, including a proposal from a consortium that features the Japanese company Proterial Ltd. and two Indian automakers.
L&T's planned expansion marks the diversification of India's largest infrastructure company beyond its traditional areas, such as construction, heavy engineering, and industrial projects. Furthermore, this plan is consistent with the company's plans to invest in electric vehicle motors that utilize permanent rare earth magnets.
The potential entry of the company into the permanent rare earth magnet market coincides with the government's efforts to establish a domestic production cycle after China, which controls 90% of the global volume, restricted exports of this critical component last April. In addition to electric vehicle motors, magnets are used in wind turbines, industrial robots, and various electronic devices.
Last year, India approved a seven-year plan that includes 6,450 crore rupees in sales-linked incentives and 750 crore rupees in capital subsidies to boost magnet production. The country aims to achieve an internal capacity of 6,000 metric tons annually, offering support to approximately five companies.
The government hopes these incentives will encourage both domestic and foreign magnet producers to establish local manufacturing facilities, thereby reducing reliance on Chinese suppliers who have benefited from state support and economies of scale.
L&T's application for rare earth magnet production will also support the company's own plan to locally develop next-generation traction motors for electric vehicles. As reported by the engineering firm during its earnings call last month, the company has partnered with Israel-based EVR Motors for this purpose. L&T stated that its EPS Mobility division secured its first commercial order for the supply of 500,000 such motors to a two-wheeled manufacturer over three years, without naming the client.
