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India is considering requiring automakers, especially luxury including Audi and BMW, to purchase green steel for their premium or ultra-high-end cars. Furthermore, the idea, which is presently being presented as a suggestion, seeks to promote the use of green steel, which has minimal carbon emissions during production, in government projects.
According to an official familiar with the discussions, premium carmakers or luxury firms could use green steel, particularly for high-end products. The general idea is that demand for premium or luxury vehicles is less responsive to price variations caused by technical advancement. “If not in full, part of the supplies for high-end offerings or luxury cars should include green steel. But right now that is a suggestion which is still on the drawing board. Let’s say it is a recommendation which is being heard,” the official said.
In general, there is no specific definition of ‘green steel’. It refers to metal produced using methods that have minimal carbon emissions, such as hydrogen, renewable sources of power, and recycled scrap.
While the cost of setting up a traditional integrated steel plant in India is $1 million per one million tonne production capacity, a switchover in tech leads to costs more than doubling to $2 – 2.5 million per million tonne of steel produced.
“Green steel will come at a premium. But the argument put forward is that as usage increases and more steel makers adopt low-carbon-emitting tech, the premium on steel comes down. Apart from luxury cars, the government will also look at the possibility of procurement across its own projects so the manufacturing facilities in India become commercially viable, and there is an incentive to invest, too,” the official said.
European car makers like Volkswagen are partnering with Salzgitter AG to source green steel. Volkswagen plans to use low-CO2 steel in important future projects from the end of 2025. Mercedes-Benz AG became the first car manufacturer to take an equity stake in Swedish start-up H2 Green Steel as a way to introduce CO2-free steel into series production.
BMW and Ford are also exploring the introduction of green steel in their supply chains. The latter has a supply tie-up after 2030 with Tata Steel’s Dutch arm (Netherlands unit) at no specified quantity and price, apart from tie-ups with ThyssenKrupp and Salzgitter. The former has tie-ups in Europe and now also in China and the USA.
“So, it was pointed out that certain car manufacturers in Europe, who also have operations in India, are already exploring partnerships for green steel within their supply chains. If Indian mills establish production facilities, why not pursue a similar initiative here? This is especially feasible for premium products, provided final prices are manageable,” another official in the know said.
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