• Factory to make EVs and plug-in hybrids for European buyers
  • Hungary has attracted a string of battery, EV investments

BYD Co. plans to build its first European car factory in Hungary, rewarding Prime Minister Viktor Orban for years of courting China for investments.

The plant in the southern city of Szeged will produce EVs and plug-in hybrids for the European market and create thousands of jobs, BYD said Friday. The investment comes a few months after Brussels announced a probe into state subsidies to Chinese EV makers, and might help BYD dodge any resulting import tariffs.

BYD’s decision caps a year of rivalry among European countries including Germany and France, hoping to win the investment and employment coming with an auto plant. The move raises the prospect of another formidable competitor to Europe’s domestic carmakers, particularly for Volkswagen, Stellantis and Renault, which have so far been unable to dislodge Tesla Inc. from its dominant position in EV manufacturing.

The move is “the first step towards serious competitive entry, and sets a two-to three-year timeline ticking,” Bernstein analysts led by Daniel Roeska said in a note. “BYD is stepping up its overseas expansion as its domestic market share sees a peak.”

The plant will likely have a capacity of around 200,000 cars annually, the analysts said, with BYD indicating a phased ramp up.

Looking Eastward

Orban has been orienting Hungary eastward for years by building political and business links with Russia, China and central Asian countries. The prime minister, who held talks with Russian President Vladimir Putin and China’s Xi Jinping in Beijing in October, has confronted Hungary’s allies in the European Union and NATO over the war in Ukraine and ignored local protests over pollution caused by new battery plants.

BYD’s decision will add to Hungary’s role as a leading European hub for the EV industry, where production facilities help mostly German carmakers including Mercedes-Benz, VW’s Audi brand and, most recently, BMW transition from the era of combustion engines. Regional competition is fierce, with the car industry also underpinning the economies of eastern European peers Slovakia and the Czech Republic.

Government Subsidies

Hungary has received an estimated €20 billion ($22 billion) of EV-related investments in the past five years, including a €7.3 billion battery plant China’s Contemporary Amperex Technology Co. Ltd. is building in the eastern city of Debrecen. BYD already produces electric buses in the Hungarian city of Komarom.

Hungary will provide subsidies for the BYD plant, though it will only publish the amount after receiving the European Commission’s approval, Foreign Minister Peter Szijjarto said in a statement.

“This is set to be one of the biggest investments in Hungarian economic history,” Szijjarto said.

Chinese brands such as BYD, SAIC Motor and Nio have been expanding in Europe to become less dependent on their home market, where oversupply and a price war Tesla touched off over the last year are weighing on profits.

While Chinese manufacturers’ market share in Europe is still low, the country’s dominance in plug-in vehicle production has put the country in position to challenge Japan for the global lead in automotive exports. BYD is expanding in Europe in part because it can charge higher prices there. Its Dolphin compact crossover starts at €35,990 in Germany, more than double the asking price in China.

The EU launched an anti-subsidy investigation into Chinese EVs in October, alleging that state support has helped to keep prices artificially low. This may lead to countervailing action such as higher tariffs against imports.

BYD along with Shanghai-based SAIC and Zhejiang Geely Holding Group Co. have been made a focus of the EU investigation. Beijing has repeatedly criticized the move, calling it a breach of World Trade Organization rules. Europe is the biggest EV export region for China, receiving more than 600,000 vehicles as of November this year.

In a decree published late Thursday, Orban assigned 46.3 billion forint ($133 million) in financing from the budget to upgrade road, rail, power, gas and water infrastructure around an industrial park in Szeged.

Written by:  and  — With assistance from Danny Lee @Bloomberg

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