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Looking to Continue Cruising in Top Gear, Despite Road Bumps

The automotive sector in Hungary, so often tagged the “engine” of the local economy, reached its highest rate in March in the past two-and-a-half years, the most recent figures reveal. The Budapest Business Journal discusses the market with some of the most prominent players.

The ground breaking for the second Mercedes factory on June 5, 2018. Then it was described as a “Full-flex plant”. Mercedes has denied press reports the factory will be put on hold.

The Hungarian government has treated the automotive sector as a national strategic industry for long years, with statistics revealing that the local economy is heavily dependent on the chiefly German manufacturer-dominated sector. The automotive industry provides 10% of Hungarian GDP, and 25% of the country’s exports.  

The output of the automotive sector rose by 12.8% in March, as compared to the same month a year earlier, according to latest figures from the Central Statistical Office (KSH). Growth in the sector well exceeded the 8% increase in overall industrial output. The automotive sector accounts for about 30% of manufacturing output, KSH says.

Opel’s plant in Szentgotthard puts out small and midsize gasoline and diesel engines for Opel car assemblies around Europe. Last year this one plant alone rolled out 313,000 engines.  

“This is a decline in comparison with previous years due to overall changes on the market (less demand for diesel and a market shift from traditional body styles to SUVs),” Zoltán Kaszás, spokesperson for Opel Szentgotthárd Kft. tells the BBJ.

Nevertheless, following the Groupe PSA take-over of Opel from GM, the product portfolio is about to change.  

Start Your Engines!

“Starting in December this year we will be producing the award-winning 1.2-liter three-cylinder turbo PureTech PSA engine in parallel with the current engine lineup. The integration works for the new engine are already underway. We are reconstructing our machining and assembly lines to accommodate the new product. This intensive work is largely performed by our own technicians and maintenance people,” Kaszás adds. Following the launch of the new engine type, Opel expects production volume to rise again in the years to come.

Audi Hungaria Zrt., which develops and produces engines for its parent Audi AG and other members of the Volkswagen Group in Győr, saw a successful 2018. The factory put out 1,954,301 engines last year, slightly down from the 1,965,165 in 2017, according to a press statement Audi sent the BBJ.  

The production unit produced 100,000 vehicles, again slightly down from 2017’s 105,491. Audi’s turnover was also down at EUR 7.377 million as compared to EUR 7.55 mln in 2017. Nevertheless, Audi Hungaria’s head count has grown, from 12,307 at the end of 2017 to 13,084 in 2018.

“2018 was an anniversary year for us, and one that took us past remarkable milestones. The production of electric powertrains brought Audi Hungaria, in the company’s 25th year of operation, to the era of electromobility,” Achim Heinfling, managing director of Audi Hungaria, says.  

“True, we also had many a challenge — the fluctuations in production caused by the switch to the WLTP standard is a good example — which took a lot of our time and energy. Taking all the above in consideration, we can say that in 2018 the company maintained a sound production volume with good financial results. The competition is heating up in the segment which will go on presenting challenges for us in 2019: we will have to introduce efficiency and savings measures in order to maintain the competitiveness of Audi Hungaria,” he adds.

Competition indeed is getting stronger in the industry that sports more than 600 active automotive companies. BMW Group is currently building a plant in Debrecen through an investment of approximately EUR 1 billion, offering a capacity of up to 150,000 units a year and creating more than 1,000 new jobs.

“The plant in Hungary will bring greater capacity to our worldwide production network. After investments in China, Mexico and the USA, we are now strengthening our activities in Europe to maintain a worldwide balance of production between Asia, America and our home continent,” András Salgó from the corporate and governmental affairs department of BMW Group Magyarország told this newspaper.

Recruitment Launched

“We are on target with our project. As already communicated, preparation of the land has started this year. The BMW Group will take over the land once it is prepared for the construction of the plant,” he added. The company says it has already started recruiting for the new plant.

In mid-May, news broke that due to challenges facing the German automotive industry, several large manufacturers are rethinking their plans. Citing information from Daimler HQ in Stuttgart, and the German business newspaper Handelsblatt, online news portal index.hu reported that the building of a second factory by Mercedes’ in Kecskemet might be affected.

In a statement sent to the BBJ, the press office of Mercedes Benz Hungary Kft. insisted its plans have not changed.

“Countless developments are running at the Hungarian site in addition to the expansion. The factory operates at full capacity, and its production program is already saturated for the next year, as the demand for compact cars manufactured here continues to grow,” it says.

“The Mercedes-Benz factory in Kecskemét is a major player in the Hungarian economy. The company currently employs about 4,700 people. In the past, successful business year, we again produced more than 190,000 cars and achieved nearly EUR 3.6 bln in net sales,” the press office says.

“Mercedes-Benz Manufacturing Hungary Kft., as an enterprise, has paid about EUR 26 mln in taxes and contributions to the Hungarian state and to the city of Kecskemét.” It adds that Daimler AG “possesses only good experiences in Hungary and counts long-term on its investment”.

Magyar Suzuki Corporation has also been a significant player in the Hungarian national economy for 27 years. “In line with the steady market growth since 2015, market expansion continued both in Hungarian and in the European market in 2018,” the Japanese-owned manufacturer tells the BBJ.  

“Currently, at Magyar Suzuki both production and staff are stable; we produce two models in two shifts,” the statement adds.

Suzuki praised Hungary for offering a favorable tax and financial environment. “The government’s measures and the available EU Funds greatly facilitate the R&D activities and development of digital environments. Also, the reduced employer contributions, supplier and investment promotion programs represent an advantage,” the statement adds.

The Esztergom factory has been playing a leading role in innovation and applying manufacturing technologies since 1992. Magyar Suzuki Corporation concluded a three-year factory modernization project in 2016, implementing significant developments in automation and robotization.  

Following the modernization, manufacturing processes have become safer, more efficient and more environmentally friendly. With respect to the level of robotization, Magyar Suzuki leads the way in Hungary with 770 robots working throughout the production line, where the installation is also aided by smart systems. Currently, Suzuki is working on a HUF 5.3 billion multi-phase innovation development project at its factory in Esztergom, supported by EU funding, through which the manufacturer expects “new, competitive, safe and thoroughly tested Suzuki prototypes will be created at Suzuki factory by 2020,” the statement concludes.