EV Market and Hungary: Fancy a Roller-Coaster Ride?


The EV market needs recharging.

Photo by buffaloboy /

With demand for EVs dropping, market players need to adapt. This is bad news for the Hungarian economy, with its existing high exposure, which will only grow thanks to the gradual completion of a series of newly announced investments.

When Chinese President Xi Jinping visited Hungary earlier in May, pundits assumed that one of the announcements would concern opening a Great Wall Motors (GWM) e-car plant. Several outlets had aired the news before the meeting, and the fact that Minister of Foreign Affairs and Trade Péter Szijjártó had visited the company’s HQ just reinforced rumors. The deal would have fit nicely into the Hungarian government’s pro-China policy that propelled the Asian powerhouse to “investor no. 1” status for the second time last year.

However, nothing was announced on that front during the presidential visit. Indeed, the 16 agreements made between the two governments concerned automotive on just one account, namely cooperation regarding the establishment of charging infrastructure. In the period since the visit, GWM decided to shut its site in Munich, scale back its expansion plans on the continent and serve the European market straight from home.

That turn of events is understandable from GWE’s perspective. Partly because of the phase-out of subsidies in Germany, demand for EVs has dropped in Europe. New market conditions call for flexible measures.

Automotive on the global level has undoubtedly seen better days. Sales in 2023 were still below pre-pandemic levels, and Q1 this year saw a decline. April figures gave more reason to cheer: data by the European Automobile Manufacturers’ Association (ACEA) showed sales up 14%. Yet, overall projections for the year are nothing more than in the cautiously optimistic range.

Trend Reversal

“For the time being, the sector in Hungary shows a mixed picture from a risk perspective: overall recovery is expected this year, but a trend reversal is likely only in the second half,” says a recent analysis of Hungary by Allianz Trade.

Such fluctuations are bad news for the Hungarian economy due to its already high automotive exposure, which is only set to grow once a series of announced investments are completed. Between 2016 and 2023, the Hungarian Investment Promotion Agency closed 55 battery-related deals worth EUR 19.6 billion.

As Raiffeisen Bank’s senior analyst Zoltán Török told online news portal HVG 360, earlier automotive and battery projects already make up around one-half of the entire processing industry. Vehicle production volume further accounts for 26.9% of manufacturing production.

The current EV gloom is already impacting players in the Hungarian market. SK On, a Korean giant that had recently opened a new battery plant in Iváncsa (50 km south of Budapest by road), fired over 600 employees because of sluggish demand. In fact, battery manufacturing in Hungary was down nearly 20% in March, year-on-year.

Things could get even more complicated if global trade restrictions are ramped up. The European Commission announced last fall that it would launch an investigation into heavy state subsidies of Chinese EV makers. As EC President Ursula von der Leyen put it in her State of the Union speech back in September, global markets were being “flooded” with cheap Chinese electric cars. The probe, initiated under French pressure for a more robust European industrial stance, is now in full swing, and Brussels could impose tariffs “before the summer break,” according to Politico.

Opposed to Tariffs

Not everyone shares this saber-rattling sentiment. Hungary, for one, opposes tariffs. Minister of National Economy Márton Nagy warned earlier at the Conservative Political Action Conference (CPAC) in Budapest that such protectionist measures ran counter to competition and could start a deglobalization trend. Germany is also against the move, while ACEA’s recommendation package calls for safeguarding competitiveness by securing a global level-playing field. The association further stresses the need to rethink the regulatory framework by embracing a more holistic approach, putting business considerations first.

It remains to be seen how things will play out, given the United States approach. In May, the Biden administration raised additional tariffs on some Chinese products from 25% (in place since the Trump presidency) to up to 100% in the case of electric vehicles. A potential second Trump term promises even harsher measures.

“Hungary is interested in a strong, competitive automotive industry. Imposing tariffs can’t be a solution,” Deputy State Secretary Bence Gerlaki of the Ministry of National Economy noted at a conference lately.

He also presented the government’s road map to enhance EV competitiveness. An incentivizing scheme is needed to push EV purchases, private and public investments to set up charging points should be subsidized, and a market for battery swapping and recycling needs to be created. An EU-level subsidy scheme would also be welcome to grant a competitive edge to European manufacturers. In fact, one of the objectives of the upcoming Hungarian EU presidency will be to find allies that support the idea of that subsidy scheme.

This article was first published in the Budapest Business Journal print issue of June 14, 2024.

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