Volkswagen low-carbon steel deal could make EVs greener

Volkswagen is looking to directly tackle the issue of slashing emissions along its value chain as it becomes one of the first major customers for Salzgitter's low-carbon steel, with plans to use it to produce new electric vehicles.

Salzgitter's formula is reportedly able to cut emissions by as much as 95% during the production of the steel which could see rollout in the first new VW models in Germany by 2026.

Read more: Steeling the future: Using hydrogen to make green steel

Industrial-scale production of this new green steel is expected to commence at the end of 2025 and will be shipped to Wolfsburg where it will be used to produce important future projects for the automaker, most notably the Trinity e-model.

VW has made plans to become entirely carbon-neutral by 2050 and has revealed it will be doing so through so-called "hot spot analysis," which will supposedly allow it to target areas of high-density emissions during the production cycle of a car.

The "value chain" simply refers to the lifecycle of a product, from sourcing the materials to long after the car has been sold to a customer. In terms of the automotive sector becoming net-zero, this means the materials must be low-carbon, the production line must slash emissions and it must run using a green engine.

To this end, the automaker will be looking to cut down on overall steel use through batteries and manufacturing car parts out of aluminium, which could cut down on material costs and the need for more carbon-intensive materials.

VW will also be looking to establish a closed-loop recycling system for steel between Salzgitter and its Wolfsberg plant.

Other aspects of the company's production lines have seen a reduction in emissions, according to Murat Aksel, a member of the board of purchasing at Volkswagen.

While minimising the use of raw steel has been a part, VW has also managed to slash emissions during the production of its most famous model, the Golf.

"The transformation to e-mobility is significantly increasing the importance of corporate purchasing in terms of decarbonisation: while the supply chain has so far been responsible for 17% of emissions over the entire life cycle of the Golf, this figure has already risen to 42% for the ID. 3," he said. 

This also means the production of their current steel supplies and the transporting has also seen emissions reductions.

Read more: COP26: SSAB pledges fossil-free steel products by 2026

"With green steel and a recycling loop, we will make Volkswagen’s supply chains even more environmentally friendly in the future," he added.

The deal will be ratified at the end of the year and will see a period of five years - 2025 through 2030 - where Salzgitter will supply low-carbon steel to VW. This may be extended should the partnership prove fruitful.

Like many other similar steel projects, Salzgitter set out to reduce emissions by replacing carbon-based blast furnaces with green hydrogen generated through renewable energy and electrolysis.

Steel is considered a carbon-intensive industry and is responsible for around 8% of global emissions. Salzgitter, currently Germany's second-largest steelmaker, estimates that its green steel could also remove around 1% of Germany's carbon emissions.

VW claims the two companies have been partners for 60 years, and their efforts in adopting green steel have already begun. Last year, the carmaker began processing samples of Salzgitter green steel which provided a blueprint to base future models on.

"The decarbonisation of society and the economy can only succeed with the cooperation of strong partners. Our joint project is an excellent example of this new way of doing business – the circular economy with closed material flows," Gunnar Groebler, Chairman of the Executive Board of Salzgitter, said in a statement.

"The close proximity of steel and car production is another ecological plus of this planned cooperation. By supplying green steel and taking back the steel residues from car production, we are supporting our long-standing customer Volkswagen in achieving its climate targets."

Salzgitter has pledged to end the use of blast furnaces in Germany by the mid-2030s.

Read more: German steel giant to end use of blast furnaces "by mid-2030s"

This roughly €3 billion transition could be aided by government funding. 6% of all of Germany's emissions come from steel production.

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