Nippon Steel is seeking 20 billion yen ($176 million) in damages from each company, alleging the two firms have infringed on its patents on non-oriented magnetic steel sheets that are used in electric vehicles, it said in a statement.

Two of Japan's manufacturing giants, the country's biggest steelmaker and automaker, slugging it out in court is a rare occurrence and signifies the high stakes involved in materials production as the global low-carbon revolution takes hold.

"Electrical steel sheets are indispensable materials for automobile electrification and are one of our key products aimed at helping decarbonisation for cars, electrical products and power plants" a Nippon Steel spokesperson said.

This is the first time Nippon Steel has filed a patent infringement lawsuit against Toyota, the spokesperson added. Nippon Steel is a longstanding steel supplier for Toyota and other Japanese automakers.

"We confirmed that there was no infringement of another company's patent before concluding a contract" with Baosteel to supply electromagnetic steel sheets, Toyota said.

Nippon Steel, the world's fifth-biggest steelmaker by output, also filed a petition for a preliminary injunction prohibiting Toyota from manufacturing and selling motor-driven vehicles that use the electrical steel sheets allegedly violating its patents.

The company decided to take legal action after it could not reach a resolution through discussions with both companies, it said.

The steelmaker declined to give further details, including the names of the Toyota products and the size of their sales.