To prevent irreversible demagnetization of a permanent magnet (PM) for interior permanent magnet synchronous motors (IPMSMs) by flux-weakening control, a robust PM flux-linkage nonsingular fast terminal-sliding-mode observer (NFTSMO) is proposed to detect demagnetization faults. First, the IPMSM mathematical model of demagnetization is presented. Second, the construction of the NFTSMO to estimate PM demagnetization faults in IPMSM is described, and a proof of observer stability is given. The fault decision criteria and fault-processing method are also presented. Finally, the proposed scheme was simulated using MATLAB/Simulink and implemented on the RT-LAB platform. A number of robustness tests have been carried out. The scheme shows good performance in spite of speed fluctuations, torque ripples and the uncertainties of stator resistance.