How will the lawsuit against Nippon Steel affect the production of Toyota cars?

Japan's Nippon Steel Corp is suing Toyota Motor Corp's customer to stop manufacturing and selling vehicles containing specialty steel made by rival Chinese supplier Baoshan Iron & Steel Co Ltd (Baosteel), which it is also suing.

Nippon Steel is suing Toyota and Baosteel in a Tokyo court for patent infringement, seeking damages of ¥ 20 billion ($ 176 million) each. It is also trying to stop Toyota from selling and manufacturing cars in Japan that use Baosteel's non-oriented magnetic steel sheets.

According to a company spokesman, Nippon Steel believes that the sale and use of Baosteel sheets in Japan violates its patent claims regarding composition, thickness, crystal grain diameter, and magnetic properties.

Toyota said it had confirmed no irregularities prior to signing a contract with Baosteel.

Baosteel said it disagrees with Nippon Steel's claims and will "firmly" defend its rights and interests.

Nippon Steel is known to have sued South Korean POSCO for over $ 1 billion in 2012, alleging that POSCO stole its technology to produce magnetic steel sheets used in transformers. POSCO later paid about $ 250 million for the settlement.

The required monetary loss is unlikely to have a significant impact on Toyota. The biggest concern would be if the court barred the company from using Baosteel steel when it ramp-ups production of electric vehicles.

Baosteel said it is currently unable to assess the impact of the lawsuit on its bottom line.

Nippon Steel could lose more if it takes on a key customer Toyota, which may try to buy more from competitors outside Japan to avoid future supply chain disruptions.

According to ratings agency Moody's, Nippon Steel is more dependent on Toyota than the automaker is dependent on the steel mill.