Since the Hybrid Electric Vehicle (HEV) became main-stream with the launch of the Toyota Prius in 1997, the use of rare earth magnets in vehicle traction motors has become common. In particular the rare earth based, hard magnetic material Neodymium Iron Boron (NdFeB) has offered significant performance benefits, not possible with other technologies, enabling the development of compact, torque- and power-dense electric traction motors. This trend has continued as mass market Battery Electric Vehicles (BEV) such as the Nissan Leaf, have come to market. However in 2011–2012 the price of these materials rose significantly, owing to geopolitical concerns relating to security of supply. Whilst the price has recovered more recently closer to historical levels, concern still remains in the minds of governments and many manufacturers of hybrid and electric vehicles. Reports have also raised questions over the environmental sustainability of these materials and this has further encouraged users to consider alternatives. This paper therefore examines why these magnetic materials have been so successful in traction motor applications. It also explores the alternatives, including those which are ready for market and those which are in the process of being developed.