From 2026, the European Union’s Carbon Border Adjustment Mechanism (CBAM) is set to move from transition reporting to financial obligations on eligible steel imports. European vehicle manufacturers could face carbon-related sourcing costs directly or through suppliers, even when they do not import steel themselves.
Steel can pass through several businesses before it reaches a vehicle plant. Imported slabs and flat products may be rolled, coated, stamped and welded into body panels, chassis parts or subassemblies. The intermediaries handling the material determine where the legal CBAM obligation first arises and how related costs may be passed on.
The EU imported 60.95 billion euros of steel and iron products covered by Chapter 72 and Chapter 73 codes in 2025. Hot-rolled and cold-rolled flat steel are particularly relevant to carmakers, but eligibility depends on the exact eight-digit product code. Some automotive supply-chain parts fall outside current Annex I coverage.
The European Commission’s December 2025 downstream proposal would extend CBAM to additional goods from 2028 if agreed. The proposed extension could change the boundary between basic metal products and manufactured components, affecting which goods in automotive supply chains are covered.
Automotive purchasers need to identify the installation that produced relevant steel feedstock, which processing steps are included in emissions calculations, and whether the importer has verified actual emissions or will use default values. A generic low-carbon certificate from an immediate parts supplier is not enough to establish those details. Emissions may differ between mills using blast furnaces, electric arc furnaces and scrap inputs, even when the steel meets the same technical specification.
The burden on vehicle makers will depend on contractual arrangements. Suppliers may charge metal surcharges, adjust long-term price formulas, hold costs fixed until the next model-year negotiation or absorb increases to defend sales volume. An importer carrying CBAM certificate costs may pass them to a service centre, which may or may not pass them to a stamping company. Carmakers that buy finished components from EU suppliers rather than importing steel directly may still face indirect exposure.
Further market analysis would need to examine product-level imports, metal service centres and documented supplier relationships in Germany, Italy, France, Spain, Poland and central Europe. It would also identify where prices are indexed to underlying steel costs and where carbon costs appear as separate contractual items. Supply chains combining reliable quality, transparent emissions evidence and manageable cost-adjustment clauses are likely to have a competitive advantage over those offering only the lowest headline steel price.