ZF Friedrichshafen and H2 Green Steel have signed a seven-year steel delivery deal worth 1.5 billion euros ($1.64 billion).
Deliveries of near zero-emissions steel are due to start in 2026.
The Swedish company is among a new breed of steelmakers seeking to overhaul the way the alloy is manufactured in one of the most polluting industries in the world, replacing coal with green hydrogen made using renewable power.
The sector, which has relied largely on the same production techniques for more than a century, accounts for about 7 percent of global carbon dioxide emissions.
The deal is expected to reduce ZF’s CO2 emissions by close to 2.3 million tons compared with traditional steelmaking processes, according to the statement.
H2GS will also work together with ZF’s sub-suppliers.
The company last month received a full environmental permit to start building a plant in Boden in northern Sweden. The facility is poised to produce 5 million tons of so-called green steel annually by the end of the decade.
The founder and largest shareholder of H2GS is Vargas Holding, which is also co-founder and one of the larger stakeholders in Swedish battery maker Northvolt.
ZF ranks No. 3 on the Automotive News Europe list of the top 100 global suppliers, with worldwide parts sales to automakers of $39.3 billion in 2021.