Hungary is a battery power, but is it worth it?

As the need for electric vehicles grows, so does the demand for batteries. According to experts, by 2030 every second new car will be electric. Catching on with the new trend, the government plans to secure the country’s car production industry. The idea is great in theory, but there are several obstacles on the horizon. Will it be good for the economy if the aspirations come true?

There are two main problems with battery and electric car production. First, it requires less manpower than regular cars. Second, this market is very heavily ruled by just a few large conglomerates. Usually, large quantities of batteries are produced by a few large companies that also invest in the research and development of these technologies. Therefore, it is questionable whether Hungarian companies can even compete in this market.

The market on the production side is mostly ruled by one country, China. This country has an average share of 60-70 percent in production. The required materials are coming from different countries where these are mined, like Australia, Indonesia or the DRC. In Hungary, most production is primarily dominated by South Korean companies. Even though the Hungarian market is dominated by South Korea, new Chinese actors are on the way.

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The role of Hungary

According to G7.hu, the total worth of investments was around EUR 5.3 billion which created about 13,800 job opportunities. The three biggest investments in the country, one by Samsung and two by SK, received HUF 138.6 billion (EUR 3.4 million) in state funding. This financed about 12 percent of the total cost of the investment. However, smaller endeavours also receive funding, which on average accounts for 10 percent of the costs. Of course, these investments require additional infrastructural upgrades in the surrounding area.

However, despite the effort, the newly settled companies usually bring their own suppliers. Hence, they are not reliant on Hungarian companies. Most of the hindrances stem from the lack of technological capabilities of the country and the small scale of the domestic market. There is no power in the hand of Hungary from a strategic perspective. As Hungary lacks the materials to have a strong chemical industry, the only way the country can have a larger stake in the more knowledge-intensive processes.

Hungary is only a superpower on the surface. First of all, statistics used present a false image as they overrepresent the role of Hungary. Secondly, the companies are just producing here, but they take no real part in Hungarian exports and the economy overall. The survival of the car production industry of the country is definitely a good point. But the road to success starts from development, not from production. Hungary needs to do its own research and development to be able to compete in this market. Nevertheless, this can mean a fast track for Hungary into a rapidly growing industry. However, for true success, more trust is needed in the innovative capabilities of domestic companies.

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Source: G7.hu