[Jan 2026] China’s Rare Earth Controls Shake Auto & Used Car Markets

Hello everyone. The automotive industry has been hit by a massive geopolitical shock right at the start of 2026.

You’ve probably seen headlines like "China Tightens Rare Earth Export Controls" or "Production Impact at Honda and Toyota." Many of you might be worried: "Are we going to see delivery delays like the semiconductor crisis again?" or "What’s going to happen to the value of the car I’m driving now?"

In this post, I’ll break down exactly what has been happening from late 2025 through today (January 2026), and how these geopolitical moves are rippling through our familiar "new and used car markets," using the latest data.

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1. What Exactly Happened? The Truth Behind the "Rare Earth Shock"

The root of the problem lies in the tightening of export controls on Rare Earths announced by China's Ministry of Commerce in October 2025. To make matters worse, in January 2026, the Chinese government announced a ban on the export of "dual-use" items (goods that can be used for both military and civilian purposes) to Japan.

Why is this such a big deal?

Powerful magnets (Neodymium magnets) are absolutely essential for the motors in Electric Vehicles (EVs) and Hybrids (HEVs). China controls about 70% of the mining and nearly 90% of the refining for the rare earth elements needed to make these magnets.

Simply put, the equation is: "If supply from China stops = We can't make motors = We can't make cars."

Although there was a temporary agreement to ease tensions between the US and China in November 2025, the industry remains in a state of high tension, with fears that "it could stop again at any moment".   

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2. Screams from the Giants: The Reality at Honda and Toyota Factories

This impact is already hitting actual production lines.

• Honda's Decision: In January 2026, it was reported that Honda would temporarily pause production at factories in Japan and China due to parts shortages (specifically related to semiconductors and magnets).
• Toyota's Struggle: Toyota is no exception. They have been forced to downwardly revise their global production plans since late 2025, potentially affecting hundreds of thousands of units globally.   

Manufacturers have now set up "War Rooms" to monitor supply chains and are scrambling to secure non-Chinese procurement routes (like Australia), but the reality is that immediate substitution is incredibly difficult.   

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3. What About the Used Car Market? The Current State of the "1.5 Trillion Yen Industry"

If new cars can’t be made, all eyes turn to used cars. Japan's used car export market has now ballooned into a massive 1.5 trillion yen industry.   

Why aren't used car prices dropping?

Many expected used car prices to cool down, but forecasts for 2026 predict they will remain high (a "Plateau State"). There are three main reasons for this:

1. The "2020 Gap": Due to global factory shutdowns during the pandemic in 2020, the "5-year-old" high-quality used cars that should be entering the market today simply don't exist physically.   
2. Historic Weak Yen: For overseas buyers, Japanese cars are essentially on a "30% off" sale. High-value vehicles like the Alphard and Land Cruiser are flying off the shelves.   
3. Resurgence of New Car Shortages: If new car delivery times stretch out again due to the rare earth issue, demand for "available now" used cars will spike even further.

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4. The "Winner" Hybrids vs. The "Struggling" EVs

Here is a fascinating piece of data. Even among eco-friendly cars, the used car value of Hybrids (HEV) and Electric Vehicles (EV) has completely diverged.

👑 Hybrids: Still the "Ultimate" Asset

Toyota's Prius, Aqua, and similar hybrids are being fought over globally.

• Reason: They offer great fuel economy in emerging markets (like Mongolia and African nations) where charging infrastructure is non-existent.
• The Russia Loophole: Even for Russia, which is under sanctions, interpretations that "Mild Hybrids" and similar vehicles are allowed have spread, reigniting explosive demand.   

📉 Used EVs: Prices Falling Due to Battery Anxiety

On the other hand, used EVs (like the Nissan Leaf) are struggling.

• Battery Replacement Fears: The fear that "buying used might mean a multi-thousand dollar battery replacement bill" is crushing resale value.   
• Drop in New Prices: Technological innovation is driving down the price of new EV batteries, which ironically makes older technology in used EVs look relatively less attractive.   

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5. 2026 Outlook: How Should We Move?

2026 looks like it will be a year where geopolitical risks and market demand are complexly intertwined.

• Selling: If you are thinking of selling a gasoline or hybrid car, now is a great time to sell due to robust overseas demand (especially from Russia and Africa). Vehicles that are "5 to 7 years old" can expect particularly high prices.
• Buying: If you are eyeing a used EV, this might be your chance. Lower resale value means, conversely, that you can "buy low." If your main usage is home charging and you aren't worried about long-range driving, the cost-performance is unbeatable.

Final Thoughts

Don't think of this as just "some magnets" or "some rocks." China's rare earth regulations are directly connected to the trade-in value of your car and the delivery date of your next one.

Keep your antenna up for trends in USS auctions and international regulations, and let's navigate our car life smartly!

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※ This article is based on research and data as of January 2026. Market conditions are subject to change.