German press: BMW and Mercedes investments in danger in Hungary?

Inside the Hungarian Mercedes-Benz plant in Kecskemét. Source: facebook.com/MercedesBenz

Leading German business newspaper Handelsblatt wrote in a Sunday analysis that German automotive industry is facing significant problems so giants like BMW and Daimler Mercedes will probably start to cut their budget in Hungary by postponing or even cancelling some of their planned investments.

BMW not to build a new factory in Debrecen?

As we reported before, BMW and Hungarian minister of foreign affairs and trade, Péter Szijjártó,  announced in July 2018 that the German car manufacturer was going to build an over 1 billion euro factory for the production of conventional and electric cars in the eastern Hungarian city of Debrecen. The minister added then that the factory would have the capacity

to manufacture 150,000 vehicles a year and it would start off with 1,000 employees.

The agreement already pushed up real estate prices in and around the city and the Hungarian government signed the grant agreement with the company in October. Based on the plans, the building of the new factory is going to start this year.

However, according to portfolio.hu, BMW had two profit warnings since then; the number of sold vehicles is falling which might result in a possible correction in the plans. Though production director Oliver Zipse still have hopes regarding the planned enlargement of the production in a low-cost city like Debrecen, Nicolas Peter, the company’s financial director already said that the monetary state of the company is tense enough to

think twice about creating exaggerated capacities in the future.

This is because markets do not perform as good as previously expected, so the control over the costs weakens. Managing director Harald Krüger said last week that they would do everything they can.

Mercedes has already made its decision

The article highlights that huge German premium car manufacturers like Audi (Győr), Mercedes (Kecskemét) and BMW (Debrecen) had great plans in Hungary before.

However, meanwhile, BMW is still analysing the situation, another automobile manufacturer giant, Mercedes, having a huge car factory in Kecskemét, Hungary, already made its decision. The leadership of the company stopped the enlargement of the plant and postponed the start of the production there for at least one year – Handelsblatt reported based on information received from company officials. According to the previous plans,

the enlargement would have cost 1 billion EUR but Mercedes

is now saving up to reach its income goals set before. This is because their profit margin fell from 9 pc to 6 pc.

Concentrating on electric cars?

HR-director Wilfried Porth said in an interview that they are working to better processes and increase efficiency. He highlighted that there is no general hiring freeze yet, but there are areas where they do not hire new colleagues. They will reduce r+d allocations on their traditional car portfolio (produced e.g. in Kecskemét) and instead they are going to

concentrate on the development of their electric car portfolio.

Handelsblatt says that a growing number of people would like to buy electric cars, so companies have to react to the change in the trends. Furthermore, despite a huge and expensive media campaign, in April, the number of cars sold decreased by 4.5 pc in the case of Mercedes and 13 pc in the case of Audi. Moreover, the USA is planning to tax European automotive companies which is also bad news regarding sales and income. Therefore, BMW sopped every investment and plans to save up 12 billion EUR until 2022.

HVG asked BMW and Mercedes about what Handelsblatt wrote. Mercedes did not answer, but BMW said that they are not commenting on media speculations. They added that they are going to retain their global production equilibrium by strengthening their activity in Europe after having done so in China, in Mexico, and the USA.

Source: portfolio.hu, hvg.hu