Sterling Tools taps AEM’s rare earth-free technology to power India’s EV future

Why Has Sterling Tools Partnered with AEM for Magnet-Free Motors?

Sterling Tools Limited (NSE: STERTOOLS; BSE: 530759), a key player in India’s automotive components sector, has announced a significant technological leap with the signing of a Technology Licensing Agreement with United Kingdom-based Advanced Electric Machines (AEM) Ltd. The agreement, dated May 13, 2025, marks the formal launch of a new chapter in India’s electric vehicle (EV) supply chain: the local manufacturing of Rare Earth Magnet-Free traction motors through Sterling’s EV subsidiary, Sterling Gtake Electro Mobility (SGEM). This move directly addresses India’s overdependence on China for permanent magnet materials and aligns with the broader national agenda of self-reliant manufacturing under the Atmanirbhar Bharat initiative.

In practical terms, this partnership gives Sterling Tools access to AEM’s patented technologies that produce traction motors without using rare earth magnets. These innovations are already commercially validated, offering robust torque performance without incurring weight or size penalties—challenges that typically plague magnet-free systems. With this licensing deal, SGEM will manufacture the motors at its Faridabad plant and market them across a wide range of EV platforms, from two-wheelers and cars to light commercial vehicles.

The decision is underpinned by a market forecast that sees India’s traction motor segment scaling up to ₹15,000 crore by 2030, fueled by EV adoption across commercial and passenger segments. This forward-looking move cements Sterling Tools’ intent to transition from a component supplier to a holistic EV subsystem player, offering integrated motor-control units developed domestically for local and export markets.

How Will This Shift Impact the Indian EV Supply Chain?

The licensing agreement with AEM strengthens India’s resolve to cut down reliance on China-dominated rare earth magnet supply chains. Given recent global disruptions in the rare earth market and increasing geopolitical pressure to localize green technology supply chains, this technology deal is both strategic and timely. The partnership aims to empower Indian original equipment manufacturers (OEMs) and Tier-1 suppliers with the ability to procure high-performance traction motors within India, a move that could significantly reduce import dependency and enhance domestic technological capability.

Moreover, the collaboration includes co-development of integrated motor and controller solutions—a key demand from EV OEMs looking to consolidate powertrain subsystems. Such integration not only reduces cost and weight but also improves efficiency and manufacturability. The company plans to support these integrated solutions with localized technical and application engineering services, thus improving adoption and performance customization.

Sterling Tools Chairman Anil Aggarwal noted that the initiative affirms the group’s shift from being a Motor Control Unit (MCU) specialist to a full-stack EV powertrain solutions provider. He reiterated the company’s commitment to supporting Indian OEMs through deep technology collaboration and targeted engineering support, especially in a sector as dynamic and fast-evolving as electric mobility.

What Does AEM Bring to the Table?

Advanced Electric Machines Ltd. is a UK-based pioneer spun out of Newcastle University in 2017, known for its innovations in magnet-free electric motor design and manufacturing. AEM’s CEO, Dr. James Widmer, pointed out that the collaboration with Sterling is built on years of groundwork, including extensive discussions and joint studies to understand India’s EV market and manufacturing landscape. With over 46 international patents covering its core designs, AEM’s portfolio provides a clear technological moat.

The firm’s motor designs replace permanent magnets with induction or synchronous reluctance-based architectures, which not only eliminate the environmental and geopolitical risks associated with rare earth mining but also reduce manufacturing costs. In Western markets, AEM’s technologies are already under evaluation or use by top-tier automotive players, and this new partnership opens the door to mass-scale deployment in India’s cost-sensitive and high-growth EV space.

From a sustainability standpoint, AEM’s offering directly aligns with India’s twin goals: achieving net-zero emissions and increasing indigenous innovation. Dr. Widmer added that the companies are ready to “hit the ground running” with immediate implementation and commercial production expected to follow soon.

What Does This Mean for Sterling Tools’ Business Strategy?

Sterling Tools has historically been known for its leadership in the cold-forged fasteners market, serving a diverse customer base across two-wheelers, passenger cars, commercial vehicles, and agricultural machinery. However, the last few years have seen the company recalibrate toward EV-specific components, including its venture into MCUs through SGEM. With the new AEM partnership, the company positions itself further up the EV value chain.

The traction motor business, in particular, is a high-margin and high-growth segment, making it an attractive diversification path. Moreover, with an integrated offering that includes both motors and controllers, Sterling Tools is now better positioned to serve the increasing demand for bundled EV sub-systems. This also helps capture greater wallet share from OEM customers and insulates the company from commoditization pressures that plague legacy auto parts segments.

The company is also expected to benefit from ongoing government support in the form of Production Linked Incentive (PLI) schemes for electric components and vehicles, which offer capital subsidies and tax incentives for eligible domestic manufacturing.

How Is the Market Reacting? Stock Sentiment and Institutional Flow Insights

Following the announcement on May 13, 2025, Sterling Tools Limited’s stock (STERTOOLS) registered moderate intraday gains on both NSE and BSE, reflecting early investor optimism around the company’s strategic pivot. Market analysts noted that while the stock is still trading below its 52-week high, the long-term re-rating potential is significant, especially if SGEM’s traction motor volumes scale successfully in the next 12–24 months.

Foreign Institutional Investors (FIIs) have historically held a moderate stake in Sterling Tools, with recent activity suggesting increased interest in EV-aligned Indian manufacturing firms. With this new partnership, institutional inflows are likely to rise further, particularly from ESG-themed funds and mobility-focused asset managers. Domestic Institutional Investors (DIIs), especially automotive-themed mutual funds, are also expected to review their positions in light of the EV narrative embedded in this strategic deal.

Early buy-side commentary indicates a positive-to-neutral stance, with “accumulate” and “buy-on-dips” calls becoming more frequent. Analysts have flagged execution timelines and cost competitiveness as key metrics to watch in subsequent quarters.

What’s Next for Sterling Tools in India’s EV Ecosystem?

Looking forward, Sterling Tools plans to scale the domestic production of rare earth magnet-free traction motors in phases. Initial production at its Faridabad facility will likely focus on mid-range electric two-wheelers and three-wheelers—segments with high volume and lower technical complexity. Over time, the company aims to move up the value chain to serve the four-wheeler and commercial EV segments.

The company is also expected to explore export opportunities to markets in Southeast Asia and Africa, where local EV ecosystems are emerging and cost-effective powertrain solutions are in demand. Meanwhile, product integration R&D will continue with AEM’s support, ensuring that future offerings remain globally competitive.

In a broader industry context, this partnership reaffirms a shift among Indian tier-1 auto component makers toward intellectual property-led collaborations, as the country’s auto sector enters a transformative phase. If Sterling Tools executes efficiently on this transition, it may emerge not just as a manufacturer but as a technology exporter in the EV value chain.