Hungary’s battery cluster has a special position as the hand cashier of the Chinese automotive industry – “Endangering our security”

A few years ago, the government of former Hungarian Prime Minister Viktor Orbán decided that Hungary would become Europe’s leading producer of electric car batteries, motivated by the strengthening of the country’s geopolitical position.

Hungary acted against the interests of the EU, as it has always done. With the help of Hungary, Chinese manufacturers avoid the tariffs set by the EU, which are meant to protect Europe’s own car industry from state-supported Chinese production.

As a result of Orbán’s policy, both electric car manufacturer BYD and battery manufacturer CATL now operate the largest factories in Europe in Hungary. BYD has also moved its European headquarters to Hungary. There are other Chinese companies operating in the country, for example the battery factories of Sunwoda and EVE Energy will be completed in the near future.

China already has almost 20 projects related to electric cars and batteries in Hungary. The country has invested about 15 billion euros in Hungary. Last year, Chinese companies invested more than 5 billion euros in Hungary.

China has been Hungary’s biggest foreign investor for years. Chinese investments put Hungary at the center of the European automotive industry’s green transition.

A few years ago, South Korea’s Samsung also converted its former TV factory in Gödi, near Budapest, to manufacture batteries for electric cars.

BYD plans to make a total of 300,000 cars a year in Hungary to be sold to the European market. The production of the new factory started last year. BYD says that it imports batteries from China because it does not want to invest in its own battery production here.

The capacity of the battery industry in Hungary is expected to be 1.2 million batteries per year by 2030. CATL already holds almost 40 percent of the European battery market. Chinese battery factories do not yet appear in Hungary’s export statistics.

“The representatives of the Chinese car industry seem to think that the German car industry will die soon, and the Chinese will take its place. I don’t think the Europeans will stay involved in this competition,” says researcher Andrea Eltétö from the Institute for World Economics think tank.

Loose laws and generous subsidies

One of Hungary’s attractive factors has been its lax environmental legislation. Investing in old EU countries would be much more expensive. In Hungary, Chinese factories are allowed to operate more freely. In the case of Chinese investors, it has often been talked about how they bring everything from their home country. This also applies in Hungary.

“The Chinese don’t want to cooperate if they don’t absolutely have to. The components are produced in Hungary, but the Chinese or Koreans are the manufacturers, not the Hungarians. They bring everything, including partners from Asia,” says Eltétö.

Hungary’s role has remained the provision of plots of land and the construction of infrastructure, as well as substantial state subsidies. With these, Hungary has attracted Chinese automotive industry investments to the country.

Germany’s BMW also built an electric car manufacturing plant near CATL in Debrecen, Eastern Hungary, where an entire electric car industry cluster now operates. BMW’s Neue Klasse models are produced at the factory. BMW has said that Chinese batteries from nearby factories are particularly suitable for Neue Klasse cars.

“The Germans work here in symbiosis with the Chinese,” says Eltétö.

Other German manufacturers Daimler and Audi operating in Hungary are also customers of Chinese factories. But Europe is still the main market for the Chinese.

The EU has now woken up to the threat posed by the Chinese automotive industry. The Commission is preparing a directive that requires that at least 70 percent of Chinese electric cars and batteries with components manufactured in the EU are manufactured in Europe. The Union wants to protect its own industry. At the same time, it wants to prohibit member countries from subsidizing the purchase of electric cars imported from China.

The policies of the new administration are awaited

Hungary’s new government, which is starting its work, will bring a change to Orbán’s policy towards Chinese battery manufacturers, but how, it will be seen in the near future.

Hungarians are worried about the effects of factories on the environment. The country is not very suitable for battery factories, which use a lot of energy and water. Hungary has a bit of both. The local population has been particularly concerned about the impact of factories on groundwater and the surrounding environment.

For the CATL plant, the biggest concern is related to the sufficiency of groundwater and energy. There are no waterways in Debrecen. The factory needs two new gas power plants nearby to meet its energy needs. This will be left to the Hungarian government.

Hungarians’ concern about the environment has been increased by the problems revealed at Samsung’s battery factory. The residents of Gödi have been complaining about the factory’s emissions for a long time. White foam has appeared in the water wells in the area, and dark dust has been observed floating in the air around the factory. Some factory workers have had various symptoms.

At the end of February, it was revealed that Samsung had failed to comply with environmental standards, and that Prime Minister Orbán’s government had known about it but concealed it. The whole tangle began to unravel when the independent Telex news portal published an investigative story about the factory’s problems.

The company’s internal documents it obtained revealed serious negligence. The factory’s employees were regularly exposed to cancer-causing carcinogenic substances, which had been measured in the factory’s indoor air in amounts exceeding health limits up to 500 times. Nickel was found in some blood tests.

Samsung has received repeated fines for violating environmental laws, but the penalties are small. The scandal was also estimated to have contributed to Orbán’s defeat in the April elections.

“Orbán revealed that the government is protecting Asian investors and the motive has been obviously political,” says foreign and security policy researcher András Rácz from the German Center for Security and Defense think tank.

Eltétö believes that battery recycling will be the next big problem for the industry in the next few years. There are hardly any recycling facilities yet, Eltétö mentions Suomen Harjavalta as one of the few.

There has been a shortage of workers in Hungary for a long time. The labor force of Chinese and Korean factories is mainly hired labor from Asia.

Hungarian laws don’t apply to them, and Asian investors don’t like workers organizing. In this way, Asian factories are allowed to operate in relative peace from supervision.

In a short time, Asian migrant workers’ residential areas have emerged in Eastern Hungary, which are marked by tensions with the locals.

Finally, I ask the researcher about the effects of Chinese investments on Hungary’s security.

“If this is widely seen as the safety of the economy, environment and work, then the answer is yes, the projects endanger our safety,” says András Rácz.