German car giants and Asian battery kings: a match made in Hungary

  • Germans, Chinese and Koreans travel to Hungary
  • They control car investments and subsidies.
  • Orban Hungarians want to go to foreign trade court

BERLIN / BUDDES, Dec. 13 (Reuters) – German carmakers and Asian battery suppliers are meeting in Hungary for a multibillion-dollar wedding to ease their electric ambitions.

These companies are heading to Central Europe, where Viktor Orban’s government is opposed to China’s Western vigilance and generously offering to host foreign operations and Hungary’s claim to be a global hub for Electric vehicles (EVs).

Investment in the Hungarian car industry is being controlled by three countries: champion German carmakers, plus China and South Korea, leading EV battery leaders ahead of European rivals.

Companies from the three countries accounted for 29 of the 31 cash subsidies provided by Hungary for significant investments in its automotive and battery sectors over the past decade, according to the analysis. Reuters of government data showing the size of Germany, China and the unification of Korea there.

“Cathodes, anodes, splitters, assembly lines, complete battery supply chains are here,” said Dirk Woelfer of the German-Hungarian Chamber of Commerce in Budapest. “This is a foot in the door to Europe.”

Recipients of such subsidies include German carmakers BMW (BMWG.DE) and Mercedes-Benz (MBGn.DE) and battery makers such as China’s BYD and Korean rival Samsung SDI (006400.KS). . The average subsidy level is 15% of the investment.

In total, Hungary has received more than 14 billion euros ($ 15 billion) in foreign direct investment in its battery sector alone in the last six years, according to government figures.

Significant investments are widely classified as worth more than 5-10 million euros, depending on factors such as the jobs created.

State incentives and opportunities for automakers and battery suppliers to work side by side are appealing, according to interviews with about 20 industry players and consultants in Germany, Hungary, China and the United States. South Korea.

China’s CATL (300750.SZ), the world’s number one EV battery maker, and Korean battery giant SK Innovation (096770.KS) and Samsung SDI all told Reuters that the project near the German carmaker is An important factor in their decision to invest in Hungary, as well as the possibility of creating a source of separation and other components there.

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CATL is investing $ 7.6 billion to build Europe’s largest battery power plant in Hungary. The plant and the $ 2.1 billion BMW plant will be located in Debrecen, attracting an ecosystem of suppliers ranging from manufacturers of brake and cathodes to industrial machinery.

Mercedes-Benz is converting its plant in Kecskemet to produce electric cars, while Volkswagen (VOWG_p.DE) Audi is building cars and electric motors in Gyor.

Such large-scale business could prove beneficial for the government of Prime Minister Orban as the country faces its worst economic climate in more than a decade, with inflation running above 20%, the economy slumping and EU funds in the red. Low.

However, Hungarian EVs also face serious challenges, according to industry insiders.

One major concern is the huge demand that large-scale battery power plants will put on the grid, which requires shifting away from fossil fuels towards renewable energy to meet industry pure emissions targets, residents said. Most cars.

They added that the lack of skilled personnel in Hungary to work in the production of battery cells could also draw capacity.

HIPA, the Hungarian Foreign Ministry agency responsible for attracting investment in areas ranging from batteries and automobiles to transportation, did not respond to Reuters’ questions about the EV industry.

‘China’s good steps’

Hungary’s welcome for Asian battery makers could erupt with concerns expressed by Brussels and Berlin about the dangers of Europe over-reliance on China and other foreign powers, especially in technology. Important for the green transition.

Csaba Kilian from the Hungarian Automobile Association said, however, that for now, the need to increase EV output leaves the European auto industry with little choice but to source from Asian players.

“I strongly agree that European manufacturers should have their own sources … but it is a challenge and China has taken a good step,” he added. “There is a learning curve.”

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Europe should have the capacity to produce up to 1,200 gigawatt-hours (GWh) of EV by 2031 if the current plan exceeds the expected 875 GWh Benchmark Mineral Intelligence (BMI) estimate. But of the 1,200 GWh, 44% will be provided by Asian companies with European plants, 43% ahead of local companies and US pioneer Tesla (TSLA.O) with 13%, according to Reuters. Based on BMI data.

The prospects for the development of the battery sector in Germany are backed by record energy there as a result of Russia’s gas losses, according to car consultants at the Boston Consulting Group and Berylls Strategy Advisors.

Hungary offers a comparatively stable energy system supported by nuclear power, as well as Europe’s highest subsidies and the lowest corporate tax rate of 9%.

Ilka von Dalwigk, policy manager at the European Energy Alliance, set up by the European Union in 2017 to launch the manufacturing industry. In the country said the whole battery supply chain has arrived in the country.

“Everything is located there. When we look at the forecasts for 2025 and 2030, it looks like it will have one of the largest production capacities in Europe.”

“It may well be that Hungary is indeed the next largest rock producer in Europe.”

Asked about concerns over Asia’s reliance on technology, EU officials said the bloc, which must approve member state subsidies to investors, has a system for cooperating and exchanging information on non-EU investment. Which may affect security.

The European Commission is currently in talks with Hungary over the amount of subsidies it will provide to CATL for the construction of the Debrecen plant, the official added.

‘Send the wrong signal’

For some Western companies, setting up shop in Hungary is a difficult decision.

German carmaker Schaeffler said it was close to setting up its main electric motor plant in Hungary rather than Germany in August at the urging of Hungarian encouragement, but decided on Germany for fear of sending a “signal”. Wrong “to the frightened Germans. Loss of work abroad.

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Other industry players have expressed concern over potential issues for the growing Hungarian car industry as factories have grown, including power grids.

In particular, batteries are the most energy-intensive part of EVs to produce, which requires high energy for material drying and machine operation.

Hungary’s energy sources by 2021 include 80% fossil fuels, 14.5% nuclear power and 3.6% solar, according to Reuters calculations from data from the BP Statistical Review of World Energy.

The mix poses a problem for automakers who will soon have to identify carbon-free identities throughout their supply chain under new German and European laws.

Hungarian Foreign Minister Peter Szijjarto met with senior executives from BMW and auto suppliers, including Schaeffler and Knorr-Bremse, in Munich last month before the German automaker announced it was stepping up its investment. In the country.

Topics discussed included plans to improve transport infrastructure in Hungary and increase the amount of renewable energy used for the grid, according to one of the participating companies.

When BMW first announced its plans to build its Debrecen plant in 2018, the government committed to spending about 135 billion forints on local infrastructure improvements, according to calculations by the German Chamber of Commerce. – Hungary.

CATL Battery told Reuters it was considering developing solar power with a local partner in Hungary.

Despite the risks, Alexander Timmer, a partner at Munich-based Berylls Strategy Advisors who has worked on a number of car and battery projects in Hungary, said the country has come up with an attractive package.

“The combination of cost advantages, state subsidies and proximity to the carmaker’s factories makes Hungary more attractive to battery makers,” he added.

($ 1 = 397.54 forints; $ 1 = 0.9483 euros)

Reported by Victoria Waldersee in Berlin, Gergely Szakacs in Budapest; Additional reporting by Heekyong Yang, Zhang Yan; Edited by Pravin Char

Our Standards: Thomson Reuters Trust Principles.


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