Hungary metamorphosing into an EV powerhouse

Hungarian Prime Minister Victor Orbán too is a known supporter of peace, development and cooperation and decrier of efforts to divide the world in economic and political blocs. During the BRI summit last year, he stressed that Hungary was one of the “proponents of connectivity” and rejected the policy such as decoupling and de-risking for it “promotes blocs”, citing his country as an example where division of the world into blocs had undermined competitiveness and left it behind in technological race.

As Chinese President Xi Jinping arrived in Europe, Budapest underscored its development vision — what Orbán calls the “Hussar Cut” a foreign policy that prioritises global connectivity and rejects economic isolation, allowing it skyrocket the GDP per capita by 38% in 13 years — to the European Union (EU), urging Brussels to adopt this strategy and become strong again while warning it against the dangers of bloc formation.

China has played a key role in Hungary’s development. For instance, the Budapest-Belgrade railway, a benchmark infrastructure project under the BRI, will drastically reduce travel time between Hungary and Serbia. Agreements under the BRI will further modernise the Hungarian infrastructure as Budapest highlighted the start of preparations for several projects including charging points of electric vehicles.

Bilateral China-Hungary has reached $12 billion. Beijing is one of the leading investors in Budapest, implementing various projects across the country. There are more than €16.4 billion worth of investment projects being undertaken by China in Hungary. Once those factories are completed, they will create some 25,000 high-tech and make a big impact on its economy and high-quality development.

Hungary has made Electric Vehicles (EVs) as the lifeblood of its economic strategy, attracting envy of its fellow EU states. Through his “opening to the East”, Orbán seeks to develop strong relations with China to drive growth in the electric transition of Hungary’s automotive industry by harnessing the Chinese leadership in the development of EVs and batteries.

In 2022, China’s Contemporary Amperex Technology Limited (CATL) announced making its biggest overseas investment, of €7.3 billion, to build Europe’s largest EV battery plant in Hungary. Once completed, the game-changing and environmentally sustainable project would make cells and modules for car makers such as Mercedes-Benz, BMW, Stellantis and Volkswagen, generating 9,000 jobs.

The Chinese giant has also been bringing cutting-edge technologies to the European heart, Germany. The localisation of its innovative battery technology is strengthening Europe’s EV industry and helping its counterparts to become more competitive through production of cheaper batteries, crucial to developing affordable EVs.

Last year, Stellantis revealed its plan to construct an EV battery plant with CATL, signing a preliminary agreement. The Franco-Italian carmaker has bought 20% stakes in China’s LeapMotor, obtaining the rights of export, sale and manufacturing of the Chinese company’s high-tech, cost-efficient products outside China. The group is also reportedly considering producing LeapMotor cars in Italy to increase the Italian EV production to one million by the end of the decade.

China’s BYD in December laid out its plan to build an EV manufacturing plant in Hungry. The company’s first passenger car facility in Europe will incorporate the most advanced technology, bringing billions in euros and thousands of jobs to the country. In Budapest, one of the most important investments in Hungary’s history is seen as a consequence of years-long strategic partnership with Beijing and efforts to bet against decoupling and de-risking.

Brussels’ China policy is even facing a pushback from its leading EV manufacturers. In a latest warning, top executives of BMW, Mercedes-Benz and Volkswagen shared their strong concerns about such restrictions on their key market, stressing this could upend the bloc’s Green Deal plan.

“There will be no single car in the EU without components from China,” BMW CEO Oliver Zipse said, adding that Brussels could “very quickly shoot” itself in the foot for these measures not only would also put a drag on bloc’s ambition to cut CO2 emissions but could also leave the EU behind in technological race of EV development, undermining its own automakers’ competitiveness.

While Hungary’s policy of snubbing bloc formation, improving connectivity, supporting economic inclusion and endorsing China’s Ukraine peace plan has enabled it to successfully manage the great power competition, Budapest’s approach to revolutionise its EV sector by leveraging the Chinese technology serves a model for other countries to carefully manage their relations with major powers to push forward their technological ambitions.

Published in The Express Tribune, May 21^st, 2024.

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