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Electric cars may hurt Hungarian industry, says analysis

Automotive

The expansion of the market in electric vehicles may have a negative impact on the Hungarian economy already within five years. Hungarian suppliers of major car manufacturers will be most affected by the trend, business news portal vg.hu cites an analysis as saying.

Electric vehicles need 60% fewer parts than traditional vehicles. Given that 30% of Hungarian industry is based on producing car parts for German vehicles, the expansion of electric technology represents a considerable risk to the Hungarian economy, Balázs Vanek, country manager of credit insurance concern Atradius, was quoted as saying by vg.hu.

The German car industry is already preparing for the challenges. A consortium of 17 companies, backed by German state funds, is preparing plans for a giant factory able to produce car batteries. This is crucial on a market dominated by Tesla, LG and Samsung.

The highly automated EUR 1 billion investment will represent a further threat to Hungarian industry, however. Production costs in Germany will be lower than in the currently competitive but labor-intensive Hungarian automotive industry, which will make it inefficient to outsource production to third countries, Vanek said.

Atradius also calls attention to the efforts of China to become a market leader in automotive production, which likewise presents indirect dangers to the Hungarian industry. Part of this is that some 20% of cars sold in China must be electric-powered by 2025.

According to Atradius, this is dangerous for Hungary because the German auto industryʼs number one export market is China, and so German manufacturers operating in Hungary could weigh reorganization of their production in response to changing Chinese legislation - or even eye moves to other countries.

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