BYD Chooses Hungary for Its European Expansion

Chinese automaker BYD, which has rapidly surpassed Volkswagen and Tesla in its domestic market, has announced its decision to build a factory in Hungary as part of its commercial expansion into Europe. The chosen site is located in Szeged, a city of 160,000 inhabitants in the south of Hungary, near the border with Romania and Serbia. The state-of-the-art factory is set to create "thousands of jobs" by producing electric and hybrid models, according to BYD's statement. The investment amount and the opening date have not been disclosed.

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BYD's executives had indicated nearly a year ago that they intended to open a factory in Europe, and several countries, including France, Spain, and Germany, were competing to host the facility. In October, Hungarian Prime Minister Viktor Orban met with BYD founder Wang Chuanfu, confirming Hungary's favorable position in the negotiations. The country's participation in the ambitious "Belt and Road Initiative," which involves both commercial ties and infrastructure development, likely influenced the Chinese company's decision.

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While France, under Economy Minister Bruno Le Maire, made efforts to highlight the country's attractiveness, the decision to exclude cars produced in China from the €5,000 subsidy for the purchase of an electric car starting in 2024 did not favor the French candidacy.

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With the production of cars in Europe, BYD, known for its emphasis on 100% electric vehicles, positions itself to overcome potential trade barriers that the Old Continent might impose to protect against imports from the People's Republic. UBS analysts estimated in a note published in early September, after dissecting one of BYD's electric models, that the Chinese automaker enjoys a cost advantage of 25% over Volkswagen and Renault.

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By establishing a presence in Europe, BYD aims to offset the potential impact of the discontinuation of the ecological bonus next year. The Hungarian factory, likely to open within three years, will mark the conclusion of this strategic move. Although BYD's current European presence is modest, with sales of 11,300 cars in the first ten months of the year, primarily to short-term rental companies, the company has ambitious plans. Wang Chuanfu expressed his desire to "demolish the old legends" of the Western automotive industry. BYD sold 1.86 million electrified vehicles in 2022, including 911,000 fully electric vehicles, with strong growth, recording 301,000 sales last month. This growth trajectory could position BYD to challenge Tesla for the title of the world's leading electric vehicle manufacturer in 2023.