China and the World

Hungarian dance

CATL unveils electric battery factory in Debrecen

Budapest-w

Budapest: luring China investment

At first glance Debrecen in eastern Hungary is a quiet town with a pretty central square, seemingly untroubled by geopolitical vicissitudes. Yet through the centuries this once-Catholic, once-Protestant city has seen it all – from the fall of the Holy Roman Empire to invasions by the Ottomans, the Nazis and the Soviets. Today war rages in Ukraine, whose border is only a hundred kilometres away. Hungary also treads a potentially provocative line as a European Union member with a government that seems to want closer ties with China, and, until recently, Russia as well.

Some of these political undercurrents have delivered something positive for Debrecen, however, in the shape of a huge investment by Chinese battery maker CATL.

The plan for a €7.3 billion lithium-ion plant comes as Hungary woos wider investment from China, under the leadership of Prime Minster Victor Orbán, who is serving his fourth consecutive term in office. “As a nation, we historically link ourselves to Asia, often describing ourselves as the most Western Eastern nation and the most Eastern Western nation,” the Hungarian ambassador to China told the Global Times last December.

The new plant will become CATL’s second in Europe, following an initial factory in Thuringia, Germany. The facility in Debrecen will be some 10 times larger, however, churning out 100 GWh of batteries a year over an area of 220 hectares.

The plant will help CATL – already the world’s largest maker of batteries for electric vehicles – to better supply clients in Europe including Mercedes-Benz, BMW and Volkswagen.

In recent years Debrecen has refashioned itself as a centre of high-tech manufacturing, attracting the likes of American test equipment manufacturer NI and German automotive parts producer Continental. BMW, which has promised that 50% of its vehicles will be electric by 2030, is also building a plant in the city.

Building a second factory in Europe allows Fujian-based CATL to diversify further from the Chinese market, where the subsidies that have helped sales in the EV market grow are being scaled back.

Mercedes-Benz has also announced it will be the first customer to buy battery cells from CATL’s Hungarian plant as it bids to grow sales of its new range of EVs. However, critics of the deal are concerned about Hungary’s deepening ties with Chinese companies, with CATL joining a long list of other firms with operations in the central European nation, including controversial telecommunication equipment company Huawei.

Orbán has pursued investment from China under his Eastern Opening Policy, which he first instituted in 2010. In 2015 it was the first European Union country to join the Belt and Road Initiative, as well as the first to administer Chinese-made Sinopharm vaccines to its population once Covid struck. It has also announced plans to manufacture the same Covid-19 vaccine under licence from China this year.

Budapest’s “iron brother” relationship with Beijing gets mixed reviews from Hungarians and has occasionally sparked outright opposition – such as the demonstrations when the government closed the George Soros-founded Central European University and borrowed €1.5 billion from Chinese sources to build a new campus for Shanghai’s Fudan university.

EU officials in Brussels have also been frustrated by Hungary’s ability to veto statements criticising Beijing. Even in cases when Hungary supports a more critical stance, its position is nuanced. A few days after reluctantly backing a vote to sanction Chinese officials for alleged human rights abuses in Xinjiang, foreign minister Peter Szijjarto described the punitive measures as “harmful” and “pointless”.

After Debrecen was selected as the site for CATL’s new plant the Global Times queried why Hungary had won the race for such a massive investment. The question was a loaded one, of course, with the Chinese tabloid claiming that the answer was simple. “Budapest is rational and pragmatic. It does not follow others blindly and it doesn’t allow its national interests to be kidnapped by others,” the newspaper explained.


© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.