The design process for electrical machines requires accurate estimation of motor characteristics. The Finite element analysis (FEM) is one of the promising methods for such estimations. However, motor characteristics are not well predicted by considering the detailed geometry unless the detailed characteristics of the soft magnetic materials used for the rotor and stator cores are not considered. Recent studies have revealed that manufacturing processes significantly degrade material characteristics of electrical steel sheets, leading to low performance data of the electrical machine. The approach to consider material degradation caused by production processes, however, has not been well established yet and is a topic of actual worldwide research. The goal of this PhD thesis is to provide an approach to consider material degradation of the electrical machines, caused by shrink fitting, cutting, and interlocking. To achieve the goal, the influence of the manufacturing processes on soft magnetic characteristics of electrical steel sheets or laminations is systematically analyzed. Local magnetic measurements are employed to deliver better information about the local size of the degraded region. This is useful for the accurate modelling of electrical machines. The data obtained are applied to the analysis and evaluation of motor characteristics. In particular it is focused on iron losses and its impact on the cogging torque. The discussion on the relation between the soft magnetic material and the motor characteristics is performed in order to generalize the behavior of motor characteristics. All findings in this thesis can be extended to fit to other applications as well.