German car giants and Asian battery kings: a match made in Hungary


  • Germans, Chinese and South Koreans move to Hungary
  • They dominate auto investment and subsidies
  • Orbán’s Hungary is eager to court foreign affairs

BERLIN/BUDAPEST, Dec. 13 (Reuters) – German automakers and Asian battery suppliers are colliding in Hungary in a multibillion-dollar marriage of convenience to fulfill their electric ambitions.

The companies are flocking to Central Europe, where Viktor Orban’s government defies China’s Western wariness and offers generous perks to host foreign operations and stake Hungary’s claim as a global center for electric vehicles (EVs). .

Investments in the Hungarian car industry are dominated by three countries: Germany, a champion carmaker, plus China and South Korea, EV battery leaders well ahead of European rivals.

Companies from those three countries account for 29 of the 31 cash grants Hungary has provided for major investments in the auto and battery sectors over the past decade, according to a Reuters analysis of government data showing the extent of German, Chinese and Korean convergence. over there.

“Cathodes, anodes, separators, assembly lines, the entire battery supply chain is here,” says Dirk Woelfer of the German-Hungarian Chamber of Commerce in Budapest. “This is a foot in the door to Europe.”

Recipients of such subsidies have included German automakers BMW (BMWG.DE) and Mercedes-Benz (MBGn.DE), and battery manufacturers such as China’s BYD and Korean rival Samsung SDI (006400.KS). The median grant level was 15% of the investment.

Overall, Hungary has received more than 14 billion euros ($15 billion) in foreign direct investment in its battery sector in the past six years alone, according to government figures.

Major investments are broadly classified as those worth more than EUR 5-10 million, varying with factors such as jobs created.

Government incentives and the opportunity for automakers and battery suppliers to work side-by-side appear to have strong appeal, according to interviews with about 20 industry players and consultants in Germany, Hungary, China and South Korea.

China’s CATL (300750.SZ), the world’s No. 1 EV battery maker, and Korean battery giants SK Innovation (096770.KS) and Samsung SDI, all told Reuters that planned proximity to German automakers was a key factor in their investment decisions. in Hungary, and can also buy separators and other components there.

CATL is investing $7.6 billion in the construction of Europe’s largest battery factory in Hungary. This plant and the $2.1 billion BMW plant will both be located in the city of Debrecen, which attracts an ecosystem of suppliers ranging from brake and battery cathodes makers to industrial machinery.

Mercedes-Benz is converting its plant in Kecskemet to produce electric cars, while Audi from Volkswagen (VOWG_p.DE) is making cars and electric motors in Gyor.

Such big companies could be a boon to Prime Minister Orbán’s government as the country faces its toughest economic environment in more than a decade, with inflation above 20%, a slowing economy and a lack of EU funds .

Yet the Hungarian EV project is also running into some serious obstacles, according to many industry insiders.

A major concern is the huge demands huge battery factories will place on the power grid, which must shift from fossil fuels to renewables to meet the net-zero emissions targets of much of the auto industry, the people said.

A lack of specialized workers in Hungary to work in battery cell production could also affect capacity, they added.

HIPA, the Hungarian Foreign Ministry agency responsible for attracting investment in areas ranging from batteries and cars to logistics, did not respond to Reuters questions about the EV industry.


Hungary’s welcome to Asian battery makers could clash with concerns from Brussels and Berlin about the dangers of Europe becoming too dependent on China and other foreign powers, particularly in technologies central to the green transition .

But for now, the need to ramp up EV production leaves the European auto industry with little choice but to buy from Asian players, said Csaba Kilian of the Hungarian automobile association.

“I absolutely agree that European manufacturers should have their own sources … but it is a competition and China has made good progress,” he added. “There’s a learning curve.”

Europe should have EV battery production capacity of 1,200 gigawatt-hours (GWh) by 2031 if current plans materialize, surpassing projected demand of 875 GWh, Benchmark Mineral Intelligence (BMI) estimates. But of that 1,200 GWh, 44% will be supplied by Asian companies with plants in Europe, ahead of domestic companies at 43% and US pioneer Tesla (TSLA.O) at 13%, according to a Reuters calculation based on BMI data.

According to auto advisers from Boston Consulting Group and Berylls Strategy Advisors, the prospects for the development of a battery sector in Germany have been hampered by record energy there due to the loss of Russian gas.

Hungary offers a relatively stable energy system backed by nuclear power, as well as high subsidies and Europe’s lowest corporate tax rate of 9%.

The entire battery supply chain has come to the country, says Ilka von Dalwigk, policy manager at the European Battery Alliance, which was established by the European Union in 2017 to kick-start a homegrown industry.

“Everything is there. Looking at the projections for 2025 and 2030, it looks like it will have one of the largest production capacities in Europe,” she added.

“It could very well be that Hungary is, in fact, the next major battery production cluster in Europe.”

Asked about concerns about Asia’s reliance on technology, an EU official said the bloc – which must approve grants from member countries to investors – had a system in place to collaborate and share information on investments from non-EU countries that can affect safety.

The European Commission is currently in talks with Hungary about the size of the subsidy the country will provide to CATL for the construction of the Debrecen plant, the official added.


It is a difficult decision for some Western companies to establish themselves in Hungary.

German auto supplier Schaeffler said in August it was poised to set up its primary electric motor plant in Hungary rather than Germany because of the appeal of Hungary’s incentives, but chose Germany for fear of sending “the wrong signal” to Germans who fear job losses abroad.

Other industry players raised a range of concerns about potential pitfalls for Hungary’s burgeoning auto industry as factories advance, including the power grid problem.

Batteries, in particular, are very energy-intensive parts of EVs to manufacture, requiring a lot of power to dry the materials and operate the machine.

According to a Reuters calculation based on data from the BP Statistical Review of World Energy, Hungary’s energy sources in 2021 will be 80% fossil fuels, 14.5% nuclear and 3.6% solar.

The mix spells trouble for automakers who will soon be required to demonstrate carbon-free credentials in their supply chains under new German and European legislation.

Hungarian Foreign Minister Peter Szijjarto met with senior executives from BMW and auto suppliers, including Schaeffler and Knorr-Bremse, in Munich last month before the German automaker announced it would ramp up investment in the country.

Topics discussed included plans to improve Hungary’s logistics infrastructure and increase the amount of renewable energy for the electricity grid, according to one of the companies present.

When BMW first announced its plan to build its factory in Debrecen in 2018, the government pledged to spend around 135 billion forints on improving local infrastructure, according to calculations by the German-Hungarian Chamber of Commerce.

As for the battery, CATL told Reuters it is considering developing solar power with local partners in Hungary.

Despite the risks, Alexander Timmer, a partner at Munich-based consultant Berylls Strategy Advisors who has worked on several car and battery projects in Hungary, said the country presented an attractive package.

“The combination of cost advantages, government subsidies and proximity to car manufacturers’ factories makes Hungary increasingly attractive to battery producers,” he added.

($1 = 397.54 forints; $1 = 0.9483 euros)

Reportage by Victoria Waldersee in Berlin, Gergely Szakacs in Budapest; Additional reporting by Heekyong Yang, Zhang Yan; Edited by Pravin Char

Our Standards: The Thomson Reuters Principles of Trust.

The Valley Voice
The Valley Voice
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.


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