German FDI: Strong Manufacturing and R&D Investment Focus

Conferences

Economic relations between Germany and Hungary have been vigorous during recent decades. Based on the latest statistics, significant results have been achieved in terms of foreign trade and investment, the Hungarian Investment Promotion Agency tells the Budapest Business Journal.

German companies have a strategic role in respect to the performance of the Hungarian economy. Germany is the largest investor in Hungary in terms of foreign direct capital stock. Foreign direct investment (FDI) from Germany amounted to EUR 22.1 billion in 2016, representing 29% of the total FDI stock.   

Between 2016 and 2018, the Hungarian Investment Promotion Agency supported 72 projects from Germany with a total investment volume of almost EUR 5 bln. These developments, in the field of manufacturing or service activities, will create nearly 20,000 new jobs in the coming years. The proportion of projects of high added value is significant. Based on the investment decisions in 2018, three out of ten R&D projects will be implemented by German companies.

There are about 6,000 German-owned companies operating in Hungary, employing 300,000 people. Most of these German firms operate in high value-added areas such as the automotive and electronics industries.

Hungary’s main exports to Germany, meanwhile, are motor vehicles and vehicle parts as well as machinery and chemical products.

The largest German-owned companies, based on the number of employees in Hungary are Bosch Group, Audi Hungaria Zrt., Continental Group, Magyar Telekom Group, Lidl Magyarország Kereskedelmi Bt., Schaeffler Group, Mercedes-Benz-Group, IT Services Hungary Szolgáltató Kft., Penny-Market Kereskedelmi Kft., Siemens Group and Rosenberger Group.

Happy to Reinvest

According to the latest survey by the German-Hungarian Chamber of Commerce and Industry (DUIHK), German companies operating in Hungary are satisfied with the Hungarian business environment, and 84% of them would reinvest in Hungary.

The commitment of the largest German companies towards Hungary is also expressed in the form of strategic cooperation agreements with the Hungarian government. Some 14 German-owned companies or groups are among the 81 strategic partners of the state.

The Hungarian automotive industry has a history of nearly 120 years. Today, the sector is the flagship of the Hungarian economy. The industry is undergoing major global transformation characterized by emerging new technologies, increasingly technology-intensive production processes, new business models and changing customer behavior, as well as market uncertainties and regulatory challenges.  

The automotive industry and its market players have achieved great success, and the sector has become one of the main drivers of the Hungarian economy. Hungary has also obtained key references in the area of electromobility and the development of autonomous vehicles.

Germany-based companies create value in both the general and advanced manufacturing segments, and provide a great variety of high value-added services. By employment, German operations in the vehicle and engine parts manufacturing sectors play the most determining role.  

Major Contributor

The technology-intensive investments and R&D focused activities of German companies like Audi, BOSCH, Mercedes Benz and Rehau make a major contribution to the transformation from the “Made in Hungary” to the “Invented in Hungary” approach of the country. The continuous development of these German companies and their cooperation networks have a significant impact on several additional industries and local communities throughout Hungary.

German companies are also keen on cooperating with local vocational and tertiary education institutions and on taking advantage of the opportunities provided by the Hungarian dual education system. This enables companies to train their future employees. Students can learn and study in a project-based format, on a platform where industrial reality and academic theory meets.

The trend is unbroken, German companies are Hungary’s most important partners, and they have a vital role in the development of the market-based competitive Hungarian economy.

Case Study: BMW

Expanding the BMW Group´s production network in Europe, a new plant will be built in Hungary’s second city, Debrecen (230 km east of Budapest). The plant will create a new automotive benchmark in respect to standards in digitalization, sustainability and flexibility. Moreover, with its innovative solutions, high-tech auxiliary equipment and flexible logistics in the field of automotive production, it will instantly become a technological ground-breaker. Due to the highly flexible production system, the new facility will be able to produce models with traditional combustion engines as well as electrically powered premium cars on the same production line. Debrecen has purchased all 400 hectares of land and the preparation work is progressing according to the original schedule, as outlined in the agreement concluded with the BMW Group.

Case Study: Infineon

Infineon’s plant in Cegléd is a major production base of performance-semiconductor modules; the semiconductors made here are used in industrial automation and power technology, medical equipment, energy production, transportation and distribution, and also in the field of renewable energy sources. A new factory will be built on Infineon’s Cegléd site (80 km southeast of Budapest), creating 275 new workplaces in an investment of up to EUR 100 million.

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