8/31/2009-Hybrid carmakers could run into issues meeting demand in years to come as popular fuel-efficient car-manufacturers like Toyota (NYSE:TM) and Honda (NYSE:HMC) are eating away at rare earth metals, according to a report from Reuters. These metals are used in the cars' electric motors and are very limited, making the vehicle vulnerable to a potential supply crunch in the future, which has been forecasted by a number of experts in China.

China, is the world's largest rare earths producer, and it may start limiting its exports of these resources as demand begins to rise. According to the article, "Worldwide demand for rare earths, covering 15 entries on the periodic table of elements, is expected to exceed supply by some 40,000 tonnes annually in several years unless major new production sources are developed." Among rare elements, or "earths," used in the car's electric motors is neodymium, a key ingredient in the alloy used to create the high voltage magnets for the hybrid's electric motor. Neodymium can be found in motors used by Ford's (NYSE:F) Focus, Honda's Insight and Toyota's Prius. In addition, the alloy is also found in generators for wind turbines used throughout the world for alternative energy sources. When broken down into per-motor quantities, in this case Toyota's Prius requires 1 kilogram (2.2 lbs) of neodymium, however, that figure is expected to double as the company tries to increase the vehicle's fuel economy, according to the article that quoted Jack Lifton a strategic metals expert. Toyota's current estimate calls for sales of 1 million units of the vehicle in 2010.

As demand for these "earths" continue to rise, both for consumer products, as well as government projects, and with China already consuming its rare earths at a heightened rate, companies like Toyota and Honda will begin to focus on securing alternate sources of these materials. Reuters already reported last year that a number of Japanese firms have begun showing "strong interests" in rare earth sites in Canada and Vietnam. A Toyota spokesperson declined to comment on the company's development plans.

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