Hungarian FDI Electrified by the Electric Vehicle Buzz

German state Bavaria is a legendary automotive stronghold: it’s home to giants like Audi and BMW and some 1,100 suppliers along the value chain. And for a whole week in September, the Bavarian capital, Munich, became the nerve center of the entire mobility segment.

The 2023 edition of IAA (Internationale Automobil-Ausstellung or International Motor Show) Mobility mobilized 600-plus exhibitors, more than 500 renowned speakers and hundreds of thousands of visitors to view and test pioneering mobility concepts first-hand on-site and downtown.

The only burden was “Die Qual der Wahl,” as the Germans put it: being spoiled for choice. One thing was clear from the start: the bulk of the solutions, products and services were connected with the buzzword “electric.”

The organizers engaged in high-level politics as well as sheer celebrity power to underline that incentivizing policies and an eco-friendly public attitude pushed by famous role models are equally essential to speed the transition along the path to Net Zero.

On the one hand, and although interrupted by green activists several times, German Chancellor Olaf Scholz announced a new law to expand the number of EV charging stations that will make “range anxiety” (the fear of running out of battery life before your car can deliver you to your destination) a thing of the past.

On the other hand, Academy Award-winning actor Natalie Portman talked about the necessity of gradual change in daily mobility habits that should ultimately lead to a green future.

Stakeholder Landscape

The exhibitor line-up reflected how the stakeholder landscape is shaped in the EV race. After Germany, China had the most stalls. E-auto maker BYD occupied nearly one-third of an entire hall alone.

In his keynote speech, Hungarian Minister of Foreign Affairs and Trade Péter Szijjártó also took note of the rise of Asian market players. He stressed how European car makers had become dependent on Eastern suppliers that had raced ahead in the EV segment.

Automotive is a critical sector in Hungary with a production value of EUR 30 billion (USD 31.6 bln), which has a lot to do with the fact that Hungary offers an attractive business environment based on low taxes and incentives, the politician said.

“Those countries that can attract more investments from both the West and the East can be the winners of the transformation,” the minister highlighted. “Enabling the cooperation of German OEMs and Asian battery giants on Hungarian soil can guarantee that the economy stays on the growth path regardless of the uncertainties of the world economy,” Szijjártó added.

Hungary was represented by the booth of the Hungarian Investment Promotion Agency, which featured several state-of-the-art automotive solutions from virtual reality to autonomous driving.

The teleoperation simulator drew the most attention. It allowed visitors to drive a real car on the ZalaZone proving ground in Zalaegerszeg (230 km west of Budapest by road) from Munich.

Hungary’s European First

IAA Mobility couldn’t have been kicked off better from the Hungarian FDI perspective. In the very first press conference slot, LG Magna ePowertrain, a joint venture between LG Electronics Inc. (of South Korea) and Magna International Inc. (a Canadian automotive supplier), announced it would build its first European production facility in Hungary.

The investment of some EUR 51.6 million (USD 54.4 mln) will produce e-motors, inverters and on-boarding chargers in Miskolc (185 km northwest of the Hungarian capital).

LG CEO William Cho presented the company’s vision of the car of the future that is transferable, explorable, relaxable, and works as an extension of your living space. The joint venture’s investment is a crucial milestone on this path.

Magna Powertrain President Diba Ilunga explained the background of the decision in greater detail. For starters, the company has facilities that produce whole systems and those that specialize in components only because they keep these functions separate.

In terms of components, the company is well-equipped in Asia and North America today but not in Europe, meaning the Hungarian addition will round out its facility portfolio. Access to skilled labor was vital when they picked Hungary, as was the proximity to the company’s key locations and customer base.

“In around 2028-29, we expect to get to an inflection point when the number of EVs should reach that of vehicles with [internal] combustion engines in Europe. So, that is a big challenge for us to meet demand, and on top of that, we need to be able to get it done in a sustainable manner,” Ilunga said.

Another Hungary-related announcement at the event concerned the concept car of BMW’s Neue Klasse (New Class), units of which will roll off the production line of the company’s entirely digitized iFactory in Debrecen, Hungary, from 2025 onward.

“With Neue Klasse, we have launched the biggest investment in the company’s history. We are not just writing the next chapter of BMW, but a new book,” said board member for development Frank Weber.

The LG Magna deal and BMW’s iFactory, which will be the first of its kind in the world with zero carbon production, will further strengthen Hungary’s position in an EV value chain.

This article was first published in the Budapest Business Journal print issue of October 20, 2023.