German automotive icon Mercedes-Benz is taking steps in reducing its carbon footprint by taking an equity stake in Swedish start-up H2 Green Steel, planning to use the CO2-free steel in its vehicles, starting in 2025.

Mercedes-Benz AG is the first car manufacturer to take an equity stake in Swedish start-up H2 Green Steel (H2GS) as a way to introduce CO2-free steel into series production. Together with its steel suppliers, the company is retooling its supply chain to focus on the prevention and reduction of CO2 emissions rather than compensation.

The partnership with HSGS is another step toward CO2 neutrality, which Mercedes is pursuing as part of Ambition 2039, its goal to achieve a fully connected and CO2-neutral vehicle fleet in 2039 – eleven years earlier than the EU legislation requires.

Mercedes-Benz supports the use of carbon-free steel

“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,” says Markus Schäfer, Member of the Board of Management of Daimler AG and Mercedes-Benz AG; responsible for Daimler Group Research and Mercedes-Benz Cars COO.

A Mercedes sedan is for example made from about 50% steel, which accounts for about 30% of CO2 emissions in production. With the partnership, Mercedes is actively and consistently tackling one of the biggest challenges in the automotive industry on the road to CO2 neutrality.

CO2-free manufacturing technology at 2023 Mercedes-Benz

By using a new, innovative manufacturing process, the production of steel at the supplier level is CO2-free. By contrast, steel produced using a classic blast furnace emits an average of more than two tons of CO2 per ton. In the new process, the supplier uses hydrogen and electricity from 100 % renewable energy sources instead of coking coal in steel production.

The hydrogen serves as a reduction gas, which releases and binds the oxygen from the iron ore. Unlike the use of coking coal, this does not produce CO2, but water. The supplier uses electricity from 100% renewable sources for the energy requirements generated in the manufacturing process.

Active engagement for a sustainable steel supply chain

Mercedes-Benz and all its steel suppliers are working consistently to reduce CO2 emissions in the steel supply chain on the way to producing green steel. In addition, the company is committed to a responsible steel supply, relying on the application of recognized standards and robust certificates.

Mercedes is a member of the Responsible Steel Initiative and is actively involved in the development of a certifiable sustainability standard for the steel industry. The aim is to ensure environmentally friendly and socially acceptable steel production along the entire value chain.

CO2-neutral Mercedes-Benz supply chain

Mercedes-Benz AG pursues the goal of a CO2-neutral new car fleet along with the entire value and supply chain. Suppliers representing more than 85% of Mercedes-Benz’s annual purchasing volume have already signed an Ambition Letter, agreeing to supply the company only with CO2-neutral products in the future. This includes important steel suppliers.

At the same time, Mercedes is working with its partners to gradually increase the proportion of secondary materials in components and materials.

About H2 Green Steel

H2 Green Steel (H2GS) was founded in 2020, aiming to build a large-scale fossil-free steel production facility in northern Sweden. H2GS will produce 5 million tons of fossil-free steel by 2030. By doing this, the company will contribute to the decarbonizing of the European steel industry, one of the largest carbon-dioxide emitters.

H2GS will establish operations in Boden and Luleå. The founder and largest shareholder is Vargas, which is also a co-founder and one of the largest shareholders in Northvolt.


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