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The motivation of this analysis is the need of high efficiency and high power density permanent magnet synchronous motor (PMSM) drives for use in electrical vehicle power trains. It is clear that the chosen electrical steel for the lamination stack plays an important role, but proper quantification is missing. The purpose of this paper is to formalize the problem of selecting the optimal steel grade for the construction of PMSM’s. This question is important to steel producers, not only for helping customers selecting the most appropriate existing grade for their application, but also for defining the strategic orientation of the further R&D of enhanced electrical steel grades. The notion of steel efficiency is defined and, after describing the FE implementation of iron loss models, a methodology for material optimisation is proposed.