Chinese electric car giant BYD plans first EU factory in Hungary

Plant will produce electric cars and plug-in hybrids for the European market and create thousands of jobs, car maker said

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. 

Chinese electric car giant BYD 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 electric cars and plug-in hybrids for the European market and create thousands of jobs, BYD said. 

The investment comes a few months after Brussels announced a probe into state subsidies to Chinese electric vehicle 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 a car plant. 

The move raises the prospect of another formidable competitor to Europe’s domestic carmakers, particularly for Volkswagen, Fiat-maker Stellantis, and Renault, which have so far been unable to dislodge Tesla 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 research note. 

“BYD is stepping up its overseas expansion as its domestic market share sees a peak.” 

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

Mr 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 electric car industry, where production facilities help mostly German carmakers, including Mercedes-Benz, VW’s Audi brand and, most recently, BMW's transition from the era of combustion engines. 

Competition fierce

Regional competition is fierce, with the car industry also underpinning the economies of eastern European peers Slovakia and the Czech Republic.

Hungary has received an estimated €20bn of electric vehicle-related investments in the past five years, including a €7.3bn battery plant. China’s Contemporary Amperex Technology 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,” Mr 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. 

• Bloomberg