Automaker Mercedes-Benz announced today a new commitment to launch green steel in vehicle models by 2025, marking a significant step in the company’s efforts to decarbonize its supply chain. The new goal was made alongside the announcement by the company of an equity investment in Swedish start-up H2 Green Steel (H2GS).

While several vehicle manufacturers are aiming to address the climate impact of their products through vehicle electrification, the industry still faces emissions challenges stemming from a GHG-intensive value chain. Steelmaking is one of the biggest emitters of CO2 globally, with total greenhouse gas emissions (GHG) from the sector accounting for 7% – 9% of direct emissions from the global use of fossil fuels. According to Mercedes-Benz, a sedan is made from about 50% steel, which accounts for about 30% of CO2 emissions in production.

Several initiatives are emerging to address steel’s climate impact, including the Climate Group’s recently launched SteelZero, and the HYBRIT initiative established in 2017 between SSAB, Vattenfall and LKAB, along with startups like H2GS.

Today’s new commitment and investment by Mercedes-Benz follows the recent pledge by the company to achieve a carbon neutral supply chain by 2039, with initiatives including adding climate neutrality in its contractual terms with suppliers, and ensuring sourcing of only production materials which are CO2 neutral in all value creation stages by the end of next decade.

Mercedes-Benz’s investment in H2GS was made as part of a $105 million in Series A equity financing of the company. Founded in 2020, H2GS plans to become a large-scale steel producer and build a greenfield steel plant in northern Sweden, aiming to produce 5 million tons of fossil-free steel by 2030.

Markus Schäfer, Member of the Board of Management of Daimler AG and Mercedes-Benz AG, and Daimler Group Research & Mercedes-Benz Cars COO, said:

“With an equity stake in H2 Green Steel, Mercedes-Benz is sending an important signal to accelerate change in the steel industry and increase the availability of carbon-free steel. As a first step, we are investing a single-digit million amount. As a preferred partner of the start-up, we will be launching green steel in various vehicle models as early as 2025.”