Hungarian Investment Promotion Agency

The car industry is struggling to recover from the pandemic. According to the Organisation Internationale des Constructeurs d'Automobiles (OICA), automotive superpowers such as France, the UK, and the US were only able to meet around two-thirds of their 2019 production volume last year. On the contrary, Hungary has already exceeded its pre-Covid levels in 2023.

One of our country's flagship sectors is expected to grow further in the short to medium term. Thanks to its plant expansion, Mercedes-Benz is doubling its production capacity and relocating the production of the more crisis-resistant, premium models to Hungary. From this year, the new Cupras will be produced at the Győr site of Audi; Suzuki is growing organically; and the capacity expansion of Opel's plant electric motor production will future-proof Stellantis Group's Hungarian operations. BMW's iFactory will start operating in 2025 with an annual output of 150,000 units, while BYD's Szeged plant could enter the domestic production of electric and hybrid cars shortly.

Dynamic development would not persist without the major, mainly Asian, investments of recent years. These have positioned Hungary as a meeting point for Western and Eastern players along the entire value chain, in line with the principle of connectivity.

Therefore, it is essential that, besides battery cell manufacturers, cathode (Huayou Cobalt, EcoPro BM) and separator foil plants (W-Scope, SEMCORP), as well as others, settle down in Hungary, making production and its carbon footprint more efficient while also reducing supply chain risks.

While the Wall Street movie’s Gordon Gekko swore that "greed is good," we believe that competition is good. Electrification has created a new competitive landscape where Asian players have a head start; however, the situation will also force European companies to create better vehicles. This is a view shared by Ola Källenius, the CEO of Mercedes-Benz, who has personally called on Brussels to reduce the existing 10% tariff on Chinese electric cars. He believes that more competition would benefit European car manufacturers. One thing is for sure: customers would surely benefit from the fierce competition.

This will, of course, require new research. Battery ranges must be further extended, production costs must be decreased, the charging infrastructure must be developed. Last but not least, a more favourable support environment and new EU funds are inevitable. Let’s just consider that the range of batteries has doubled in just a few years. But what would happen if batteries had a range of 1,000 km and costs were 50-60% of today’s?

As we have repeatedly seen in the case of industrial revolutions, an initial rapid upswing can be followed by a small, temporary downturn before another major boost of technological progress. Additionally, the timing of the EU's commitment to end the sale of internal combustion engines by 2035 may be somewhat influenced by the new political situation after this year's EP elections. Nevertheless, in the longer term, the regulation will certainly lead manufacturers down a one-way street. Experts expect strong growth by 2025, from which Hungary will also benefit. With capacity coming on stream in the near future, the current annual production volume of 500,000 units could jump to 1 million. Currently, only five countries in the European Union can do this. The success of the automotive industry sends a very clear message to manufacturers and investors: keeping production in Hungary is a very rational economic decision.