The Blue Danube River meanders eastward through Germany and Austria, bringing abundant water resources and stunning scenery to the country. This is Hungary, located in the middle of Europe and known as the "heart of Europe". Hungary shares borders with 7 countries, with a land area of 93,030 square kilometers and a population of nearly 10 million. The country has a well-developed automobile industry and is known as the "Detroit of Europe", with about 432 cars per 1,000 people.
Not long ago, Hungarian Prime Minister Viktor Orban posted a photo on social media with BYD Chairman Wang Chuanfu holding his hand and looking up at the U8 car model, with the caption: "The future of the automobile industry is written by Hungary! BYD, the world's largest electric car manufacturer, is building the first European car factory in Szeged. "In recent years, from Chinese automobile to power battery companies have successively settled in Hungary, which has also made Hungary the "first brother of batteries" in Europe, and driven the Hungarian automobile industry to accelerate the transformation to electrification.
01
Automobile is the pillar industry of the economy
Foreign capital is led and export-oriented
The automotive industry is one of the representative sectors of the Hungarian manufacturing industry and the entire industry. As a pillar industry in Hungary, the automobile manufacturing industry contributes nearly one-third of the output value of Hungary's manufacturing industry, and there are more than 740 automobile and parts suppliers. Nearly ninety percent of the output value of the automobile industry is export-oriented, accounting for 1/5 of Hungary's total exports. The largest market for Hungarian car exports is in the European Union, half of which goes to Germany.
"14 of the world's top 20 car manufacturers have established vehicle plants and component production sites in Hungary, and more than half of the world's 100 largest automotive suppliers have factories or facilities in Hungary. Lin Yuanjing, a Hungarian auto parts trader whose ancestral home is Fujian, told the reporter of China Automotive News that the Hungarian government strongly supports the development of the automobile industry and is completely open to foreign investment. On the one hand, this has enabled Hungary to form a relatively complete automobile industry chain and supply chain, and the automobile industry has a good foundation, on the other hand, it is difficult for local car brands to develop, and so far Hungary has only a few unknown brands, including Icarus buses. In 2023, Hungary produced more than 500,000 cars, most of which were exported.
As for domestic car consumption in Hungary, "except for a small number of luxury models, the largest sales in the Hungarian car market are low-end models. Lin Yuanjing said that at present, the number of passenger cars in Hungary is about 400,000, and the sales of new cars in recent years are about 100,000. In 2023, in the Hungarian car market, Skoda Octavia, Suzuki Vitara, Dacia Duster and MG MG ZS will be among the top sellers, and the prices of these models will be between RMB 80,000~180,000. In the same year, Hungarian luxury car sales increased by 10% year-on-year. Among them, Mercedes-Benz sales fell by nearly 20% year-on-year, BMW and Audi increased slightly, and Porsche's sales increased by more than 25%. Overall, Suzuki, Toyota, Volkswagen, Ford, Kia, Skoda and other brands rank high in sales.
"The current situation of the Hungarian car market is related to the fact that nearly 80% of the Hungarian wage earners and middle class and their income levels. Lin Yuanjing said that Hungary is dominated by manufacturing, and the automotive industry accounts for 8% of gross domestic product (GPD). At present, the average monthly wage of Hungarian manufacturing workers is between 300,000 ~ 400,000 forints (currently 1 forint is about 0.0201 yuan), and the wages in the financial industry, doctors and other industries are relatively high, with an average salary of 600,000 ~ 800,000 forints, which is at the middle and lower reaches in Europe.
It is worth noting that in recent years, the sales of electric vehicles in Hungary have grown rapidly. In 2023, Hungary will sell around 10,000 electric vehicles, which is growing at a faster rate, although the penetration rate is lower than the Western European average. "In particular, the Hungarian government is strongly supporting the construction of charging infrastructure, and the country is forming a national charging network. Lin Yuanjing said that at present, there are more than 2,000 charging stations in Hungary and are growing rapidly.
02
A "crossroads" connecting East and West
From Open to West to "Open to East"
"Hungary is an important place for European and American manufacturing industries and multinational car companies to transfer production capacity. "First of all, Hungary is strategically located, Hungary is located in the center of Europe, known as the "crossroads" connecting the East and the West, with convenient transportation in all directions, shipping and land transportation, secondly, compared with Germany and France and other developed automobile countries, Hungary has a large number of high-quality automotive workers, but the wages are far lower than the level of workers in these countries; finally, as a bridge between the East and the West, Hungary, as a member of the European Union, has a friendly attitude towards China and is relatively stable geopolitically, which makes it able to" left and right", and at the same time attract investment from the East and the West.
In 2004, after Hungary joined the European Union, more capital from Europe, the United States, Japan and South Korea poured in, and at the same time, it also promoted Hungary to further integrate into the European value chain, improve the market system under EU standards, and become an important manufacturing base in Europe. As a result, Central and Eastern Europe, including Hungary, has become a key region to undertake the industrial transfer of the United States, Western Europe, Japan, South Korea and other countries, especially Hungary and neighboring countries, becoming the fourth largest automobile production base after North America, Asia and Western Europe. In the process, Hungary has also set the tone of openness and friendliness towards foreign investment.
As the center of the world economy shifted eastward, the Hungarian government sensed this shift in the world order and announced in 2010 a policy of "opening to the east". Since 2010, the relationship between Hungary and China has become increasingly close politically, economically and culturally. In 2015, Hungary signed a memorandum of understanding with China on the Belt and Road Initiative, and the country is also the first CEE country to establish a China-EU RMB clearing system with China and issue RMB bonds.
"Openness has made the Hungarian automotive industry ecology more and more complete, which is not only beneficial to Hungary, but also to the world automotive industry. Xia Xiaofeng, an associate researcher at the Shanghai Academy of Social Sciences, said that objectively speaking, the United Kingdom, France and other European countries have a strong automobile industry base, but compared with Hungary, the difference is mainly in "openness" and "restrictions", especially for Chinese companies.
Outside of Germany and China, Hungary is the only country with factories of Mercedes-Benz, BMW and Audi (BBA), which has made Hungary the "Detroit of Europe". It can be said that in the era of fuel vehicles, investment from the West has given Hungary a better industrial base. In the era of electrification, when the manufacturing industry of Western European automobile powerhouses such as Germany, France, the United Kingdom, and Italy is losing due to various factors, Hungary has attracted more investment from the East and promoted its own transformation by virtue of its geographical advantages and favorable policies.
It is worth mentioning that as a member of the European Union and NATO, Hungary has not been influenced by the will of the United States and Europe on some key international issues. "Especially in the face of the energy crisis in Europe triggered by the Russia-Ukraine conflict, Hungary has been able to manage the crisis and ensure that the manufacturing industry, including the automotive industry, is not affected, which is also its unique attraction. Xia Xiaofeng believes that Hungary has taken a series of measures to respond to the energy crisis in a timely manner and minimize the impact of the crisis on its own manufacturing industry.
03
Intensive policies have been introduced to attract foreign investment
Build a world power battery center
Opening up to the outside world, attracting foreign investment, and making the automobile industry bigger and stronger are the established policies of Hungary. In recent years, Hungary has revised and updated the Foreign Direct Investment Act several times, with the aim of creating a better business environment for foreign investors. The Hungarian government provides a series of preferential policies for foreign enterprises to develop in Hungary, including capital subsidies, tax exemptions, rent discounts, etc., which have achieved remarkable results.
According to the data, the total amount of foreign direct investment in Hungary in 2023 exceeded 13 billion euros, doubling year-on-year and hitting a record high. Szijjártó Peter, Hungary's Minister of Foreign Affairs and Foreign Economy, said that Hungary received twice as much foreign direct investment in 2023 as in 2022, and that these investments could create about 19,000 jobs. He also pointed out that Hungary has successfully attracted a large amount of investment in the electric vehicle industry and is expected to have the world's second largest power battery production capacity, which will help Hungary become one of the "European champions" and "global leaders" in the field of green vehicles.
In fact, as early as 2016, Hungary began to formulate a development plan for electric vehicles, and the new policy to encourage the use of green energy formulated by the Hungarian Ministry of Energy in 2023 is now under consultation, which explicitly encourages the use of pure electric vehicles, indicating that it is a decisive tool for the greening of the transportation industry, and intends to cancel the green license plate license of plug-in hybrid vehicles.
The Hungarian government is convinced that electric vehicle-related industries will be the backbone of the global economy in the future, and the Hungarian economy will be dominated by green energy in the future, and the traditional automotive industry must accelerate the transition to electric vehicles. By 2035, when Europe bans the sale of new petrol and diesel cars, the Hungarian automotive industry will completely switch to battery power. To this end, the Hungarian government has introduced a number of incentives such as subsidies for the purchase of electric vehicles, personal income tax exemptions for electric vehicles, and exemption from parking fees in public parking lots, which have led to the rapid growth of electric vehicle sales in the country.
"In January this year, the Hungarian government announced a new policy to support electric vehicles with a total of HUF 90 billion. According to Lin Yuanjing, these policies include supporting Hungarian domestic enterprises to purchase various types of electric vehicles independently, and classifying subsidies according to the number of employees and the battery capacity of electric vehicles. The subsidy amount for each company is HUF 2.8 million ~ HUF 64 million. At the same time, the Hungarian government has also provided HUF 20 billion subsidized loan support to companies that provide vehicle services such as electric vehicle leasing and sharing. In addition, the government plans to invest HUF 30 billion in the next two and a half years to build 260 high-capacity charging stations on the national road network. It is worth mentioning that in October 2023, Hungary launched the public procurement process for the public service operation of electric buses, and it is planned that from 2025, the bus fleet of the capital Budapest will be replaced with all-electric public buses.
"These policies have brought new opportunities and huge space for the new energy vehicle industry, and have also become policy advantages to attract foreign investment. Xia Xiaofeng believes that compared with the policies of some European countries, Hungary supports the development of the electric vehicle industry with relatively greater efforts and higher subsidies. In addition to a number of Chinese power battery manufacturers, South Korea's SKI, Samsung SDI, South Korea's cathode material manufacturer EcoPro BM and other power battery industry chain enterprises have invested in Hungary to build factories.
Xia Xiaofeng said that if you only look at the production capacity of power battery factories that have been built and are under construction, Hungary ranks third in the world after China and the United States, surpassing Poland, South Korea, Japan and Germany. In particular, Debrecen, Hungary's second largest city, has a planned production capacity of 130GWh here with CATL and EVE alone, surpassing Berlin and Erfurt in Germany and ranking first among European cities. Up to now, more than 30 power battery factories in Hungary have been built or will be completed, with a total investment of 14.2 billion euros.
From the perspective of Hungary's traditional mineral resources, the raw materials related to power batteries were only aluminum, iron and manganese, but the new discovery may bring benefits to the supply of lithium battery raw materials. "The lithium extraction project from the oil field under development in Hungary will bring more support to the development of the power battery industry. Lin Yuanjing said that in November 2023, Hungarian Oil and Gas Industry Joint Stock Company, one of the largest integrated oil and gas companies in Eastern Europe, discovered a large amount of lithium resources in a local oil field area in Hungary and will start relevant extraction tests. Unlike traditional salt lake lithium extraction or open-pit mining in lithium mines, Hungary will use advanced technology to separate lithium from water using direct lithium extraction without negative environmental impact. Stable production will help the Hungarian EV battery plant localize the supply of key raw materials.
04
Chinese enterprises are stationed in a "bunch".
Breaking the European "bridgehead"
On January 30 this year, BYD and the Szeged Municipal Government of Hungary officially signed a land pre-purchase agreement for BYD's Hungarian passenger car factory, and Szijjártó Peter and other government officials attended the "platform". "BYD's decision to build the first European new energy passenger car plant in Hungary is one of the largest and most important investment projects in Hungarian history, which will further strengthen Hungary's economic position, consolidate the foundation of long-term economic growth, and strengthen Hungary's position in the global electric vehicle transition. Szijjártó's remarks on the spot are not only support for Chinese companies investing in Hungary, but also the Hungarian government's ardent hope for Chinese industrial chain enterprises to promote the transformation of the Hungarian automotive industry to electrification.
As early as 2016, BYD has built an electric bus manufacturing plant in Hungary, mainly to deliver orders from Hungary, and so far BYD's electric buses have accounted for nearly 42% of the new buses launched in the region. In October 2023, BYD announced its official entry into the Hungarian passenger car market and established a comprehensive service network covering the whole of Hungary with two local dealers. On October 19, 2023, BYD's two stores in Budapest, the capital of Hungary, officially opened.
"At present, Chinese car companies building factories in Hungary can bypass some trade barriers of the European Union, reduce logistics and other costs, and can also respond more quickly to local market feedback and demand, and explore overseas production and sales models. Lin Yuanjing believes that many Chinese auto industry chain enterprises have chosen Hungary precisely because of Hungary's unique policies, taxes and other related advantages.
In recent years, there has been a new trend of investing and building factories in Hungary. In September 2022, NIO's European plant in Hungary was put into operation. Sheraiji Tibor, head of NIO's European factory, told the media that NIO has not only brought electric vehicles to Europe, but more importantly, advanced battery swap station technology. Covering an area of about 10,000 square meters, NIO's European factory is NIO's first overseas factory, and it is also the European manufacturing center, service center and R&D center for NIO's power products, providing battery swap stations for NIO's network throughout Europe.
At the same time, some Chinese power battery companies have successively settled in Hungary. In March 2022, EVE announced that it would invest in the purchase of 45 hectares of land in the Debrecen Industrial Zone in Hungary to build a factory to produce new cylindrical power batteries. Subsequently, EVE announced that its subsidiary had been designated to provide large cylindrical lithium-ion battery cells for BMW's "new generation" models. In August 2022, CATL announced that the company plans to invest in the construction of the Hungarian Times New Energy Battery Industrial Base project in Debrecen, Hungary, with a total investment of no more than 7.34 billion euros, and plans to build a 100GWh power battery system production line. According to Hungarian media reports in February this year, CATL has begun to recruit employees in Debrecen, Hungary, and its new battery plant there will be put into operation in 2025.
Upstream material companies in the power battery supply chain are also entering Hungary. As early as 2020, the company announced that it would invest about 183 million euros in Debrecen to build a factory, mainly to carry out the manufacturing of lithium battery wet base film and functional coating separator, and plan to build 4 fully automatic imported film production lines and more than 30 coating production lines, with an annual production capacity of about 400 million square meters of base film. This is also the first lithium battery separator factory built by NXT overseas. In May 2022, the company announced that it had signed a contract with ACC of France to supply approximately 655 million euros of lithium battery separator film products from the Debrecen plant to ACC from 2024 to 2030. Among the downstream customers of the company are Samsung SDI and CATL, which have set up factories in Hungary.
According to the data, in 2023, of the total foreign direct investment in Hungary of more than 13 billion euros, Chinese investment will reach 7.6 billion euros, accounting for 58%, creating more than 10,000 jobs for Hungary, which is also the largest source of foreign investment in Hungary after 2020. "Behind the trend of Chinese car companies investing and building factories in Hungary, it not only reflects the success of Hungary's investment policy, but also deeply reflects the benefits brought by the strong relationship between the two countries. Xia Xiaofeng believes that for the investment and cooperation of the automobile industry, it is not only Hungary's mature industrial base and superior geographical location that play a role, but also the long-term and stable cooperative relationship between Hungary and China, which is the basis for attracting Chinese automobile manufacturers to "get together" in Hungary.
In the context of the European Commission's advocacy of "de-risking" policies and the launch of countervailing investigations on China's imports of electric vehicles, China's new energy vehicles "going overseas" to Europe have been greatly restricted. In the long run, investing in the EU is a realistic choice, Hungary, which has a good industrial base and is more friendly to China, will it become the key to China's new energy vehicles in Europe to achieve a "breakthrough"?
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Text: Zhao Jianguo Editor: Wan Ying Layout: Li Peiyang
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