With a 120-year legacy in vehicle production, Hungary offers distinct advantages over many other Central and Eastern European countries. According to the Hungarian Investment Promotion Agency, the country boasts a robust industrial base, a deep talent pool, an expanding R&D ecosystem, and advanced infrastructure. These are bolstered by some of Europe’s most competitive tax incentives and a government committed to supporting the sector.
Since its inception in 2014, Hipa has supported 244 large-scale automotive investment projects. The agency’s strategy aims not only to secure manufacturing operations but also to elevate Hungary’s position in the value chain by attracting business service centers and innovation hubs.
A landmark development unveiled in December 2023 was Chinese EV giant BYD’s announcement that it will build its first European production plant in the university city of Szeged (some 175 km southeast of Budapest by road). The company expanded on that ambition this year when it revealed in mid-May plans to establish its European business and R&D headquarters in Budapest, marking a significant milestone in the country’s industrial ambitions.
“The first step is to secure production capacities and then to advance towards the highest possible value-added activities,” Hipa said. “The ultimate goal is to secure Hungary’s position as a manufacturing base and as a regional center for business services and innovation.”
In parallel, Western OEMs are also expanding their footprint. Mercedes-Benz recently completed construction of its second factory in Kecskemét, which will manufacture the company’s premium electric vehicles. Once operational, the site will represent the country’s largest vehicle manufacturing capacity.
Meanwhile, BMW is finalizing its new plant in Debrecen. Series production is expected to begin this fall, further boosting Hungary’s capacity in premium vehicle production.
These investments reflect a larger economic development policy centered on what Hipa describes as “Eastern Opening and connectivity.” While this includes attracting Asian capital and know-how, it also emphasizes Hungary’s role as a bridge between East and West.
This collaboration is evident in the supply chain dynamics: German carmakers operating in Hungary source key components, such as batteries, from Chinese manufacturers with a growing presence in the country. For instance, Chinese battery giant CATL will supply batteries to Mercedes-Benz’s Kecskemét plant from its nearby facility in Debrecen.
Hungary’s well-established automotive ecosystem plays a key role in this success. Opel (now part of Stellantis) and Suzuki have been operating in the country for more than three decades, helping to establish a stable supply chain and a skilled labor force. This foundation has paved the way for next-generation mobility investments.
Hipa recently revamped its investment incentive schemes to attract R&D centers, test facilities, and engineering hubs. These measures aim to keep Hungary competitive in the increasingly innovation-driven automotive sector.
“Outside of Germany and China, Hungary is the only country in the world where all three major German premium automakers, Audi, BMW, and Mercedes-Benz, maintain a significant presence,” the agency says with evident pride.
The country also took early steps in embracing electrification. Today, Hungary is home to one of Europe’s most comprehensive EV supply ecosystems, with five major battery manufacturers and numerous e-mobility suppliers. Many of the new players come from China, South Korea, and Japan, reshaping Hungary’s automotive landscape as it transitions to electric vehicles.
While these developments are promising, they also present challenges. EVs typically require fewer mechanical components than internal combustion engine vehicles, posing a risk to traditional suppliers. Companies must adapt to new technologies and prepare for greater competition from global players.
Regulatory changes in the European Union, such as stricter emissions targets and mandates for green mobility, are also influencing investment strategies. Automakers must navigate an increasingly complex compliance landscape while continuing to innovate and maintain profitability.
At the 11th Hipa Automotive Conference on May 13, co-hosted by the German-Hungarian Chamber of Commerce and Industry, executives from all the major OEMs based in Hungary voiced their support for the government’s approach. Despite global headwinds, they agreed that Hungary’s automotive sector remains resilient, adaptable, and well-positioned to manage the transition to electrification.
“We are navigating challenging times, which makes us even more grateful for the trust that the world’s leading car manufacturers place in Hungary,” Hipa CEO István Joó emphasized at the conference.
The event also highlighted widespread concerns about rising trade tensions and tariff disputes. Industry leaders emphasized the need for constructive dialogue and stable trade relations to support long-term planning and investment.
Despite these challenges, Hungary’s automotive strategy appears well-aligned with the sector’s global trajectory. Through proactive policymaking, targeted investment incentives, and a commitment to fostering innovation, the country is positioning itself not only as a manufacturing base but also as a center of high-tech automotive development.
“Cooperation should be the priority, and the automotive industry is a prime example of the inevitability of global collaboration,” Minister of Foreign Affairs and Trade Péter Szijjártó said at the conference.
As new production lines come online and global brands deepen their ties to the Hungarian economy, Hipa says that its focus remains on ensuring that the country remains competitive in the next era of mobility.
This article was first published in the Budapest Business Journal print issue of June 16, 2025.
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