BYD to Build First European Electric Vehicle Factory in Hungary

BYD, the publicly listed Chinese conglomerate known for its diverse manufacturing operations and headquartered in Shenzhen, has revealed plans to establish its inaugural European car factory in Hungary. This strategic move serves as a nod to Prime Minister Viktor Orban’s longstanding efforts to attract Chinese investments to the country.

Situated in the southern Hungarian city of Szeged, the upcoming facility aims to manufacture electric vehicles (EVs) and plug-in hybrids tailored for the European market while generating a substantial number of employment opportunities, as stated by BYD on Friday. This initiative arrives amidst ongoing scrutiny by Brussels into state subsidies directed at Chinese EV manufacturers, possibly positioning BYD to sidestep potential import tariffs.

BYD’s choice culminates in a year marked by competition among various European nations, including Germany and France, vying to secure investments and job opportunities associated with automotive plants. This development hints at the emergence of a formidable competitor to Europe’s native car manufacturers, particularly Volkswagen, Stellantis, and Renault, which have yet to challenge Tesla Inc.’s dominant position in EV production.

Analysts at Bernstein, led by Daniel Roeska, regard this move as “the first step towards the serious competitive entry,” signalling a timeline of two to three years for BYD. They project the plant’s potential annual capacity to hover around 200,000 cars, with BYD suggesting a phased scaling-up approach.

Prime Minister Orban has long been fostering closer ties with Russia, China, and Central Asian countries, steering Hungary toward the East. His recent meetings with Russian President Vladimir Putin and China’s Xi Jinping in Beijing underscore this pivot, despite facing opposition from Hungary’s allies in the European Union and NATO due to conflicts over Ukraine and local protests regarding pollution from new battery plants.

BYD’s decision further solidifies Hungary’s position as a prominent hub for the EV industry in Europe. The country hosts production facilities supporting primarily German carmakers like Mercedes-Benz, VW’s Audi, and the more recent addition of BMW, facilitating their transition away from traditional combustion engines. Eastern European peers like Slovakia and the Czech Republic also rely heavily on the automotive industry to bolster their economies.

Over the past five years, Hungary has attracted an estimated €20 billion ($22 billion) in EV-related investments, including a €7.3 billion battery plant by China’s Contemporary Amperex Technology Co. Ltd. in Debrecen. BYD already operates an electric bus manufacturing facility in Komarom, Hungary.

The Hungarian government is set to offer subsidies for the BYD plant, awaiting approval from the European Commission before disclosing the exact amount, according to Foreign Minister Peter Szijjarto. He hailed this forthcoming investment as “one of the biggest” in Hungary’s economic history.

Chinese automotive brands like BYD, SAIC Motor, and Nio are aggressively expanding into Europe to diversify beyond their domestic market. In an environment marked by oversupply and price wars sparked by Tesla, these manufacturers are seeking to gain traction. While their market share in Europe remains modest, China’s dominance in plug-in vehicle production positions the country to challenge Japan for the global lead in automotive exports. BYD’s European expansion is fueled partly by the ability to command higher prices in the region; for instance, its Dolphin compact crossover is priced at €35,990 in Germany, more than double its cost in China.

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