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Hungary’s burgeoning automotive industry has not gone unnoticed by Chinese cobalt supplier Huayou Cobalt, which has announced plans to build a nickel-rich ternary lithium battery cathode material plant in the county of Komarom-Esztergom in the north of the country.
Why it matters
Hungary, and the foreign investment within its borders, has been a contentious issue for Europe for some time now, particularly Germany. The reason for this comes down to two words: Viktor Orbán. The Hungarian prime minister is more dictator than democratically elected leader, and his record on issues such as the freedom of the press, migration and the EU (of which Hungary is a somewhat troublesome member) sits uneasily with many who find his far-right authoritarianism at odds with the rest of the bloc. This hasn’t stopped foreign companies from investing in the country, however, with the German automotive giants happy to hold their noses and take advantage of Hungary’s vast supply of expertise and cheap labour in the sector.
Now it would seem that Huayou is taking notice too, and when it comes to foreign direct investment (FDI), Chinese companies tend to be less judgemental than their Western counterparts – and Hungary ticks many boxes for a company such as Huayou.
Of the deal, Investment Monitor‘s chief economist Glenn Barklie says: “This is a strategic investment from Huayou. There are a notable number of global battery manufacturers that have established operations in Hungary, as well as several large automotive OEMs. Huayou’s investment signals the importance of supply chain proximity.
“Hungary is looking to Asia for battery FDI. The country has received 17 battery manufacturing-related FDI projects since 2019 – all from Asian countries. South Korean companies such as Ecopro, Samsung and SK have all announced operations, while Chinese and Japanese companies are also setting up in Hungary.”
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Does such Asian interest in Hungary mean that the country is pivoting away from long-time investment ally Germany when it comes from FDI? Not so, according to Barklie.
“Although its automotive industry is still heavily reliant on Germany, there are still investments into Hungary from other countries,” he says. “GlobalData has recorded 37 automotive manufacturing project announcements into Hungary since 2019 by companies headquartered across ten countries. German companies account for almost half of these investments.
“In 2022, Hungary reported a record number of FDI inflows, demonstrating its continued ability to attract investors.”
Overall, however, the deal is very simply a big vote of confidence in Hungary’s FDI landscape and the country’s job market.
“Huayou’s investment will bring not only significant capital investment – more than $1bn (Ft354.21bn) – but it will also likely create hundreds or even thousands of new jobs,” says Barklie. “Hungary’s talent pool in automotive, battery and electronics industries will likely have been a key motive in Huayou’s site-selection process. Also, the success of other Asian counterparts in the country will not have gone unnoticed.
“The company has also implied that its Hungarian operation is only a starting point for its European expansion.”
Huayou Cobalt plans to invest $1.4bn to build the lithium battery cathode material plant. The first phase of the project will cost $274m and it will have an annual output of 25,000 metric tonnes.