Car and battery manufacturers trying realize their electric dreams
2022.12.13 01:43
Car and battery manufacturers trying realize their electric dreams
Budrigannews.com – In order to advance their electric ambitions, German automakers and Asian battery suppliers are joining forces in Hungary in a convenient multi-billion-dollar partnership.
Companies are flocking to central Europe, where Viktor Orban’s government is defying Western skepticism regarding China by providing generous incentives to host foreign operations and stake Hungary’s claim as a global hub for electric vehicles (EVs).
Interest in the Hungarian vehicle industry is being overwhelmed by three nations – Germany, a top dog carmaker, in addition to China and South Korea, EV battery pioneers far in front of European opponents.
According to a Reuters analysis of government data that demonstrates the extent of convergence between Germany, China, and Korea in Hungary, businesses from those three nations have contributed 29 of the 31 cash subsidies that the country has provided for major investments in its auto and battery sectors over the course of the past decade.
Dirk Woelfer of the German-Hungarian Chamber of Commerce in Budapest stated, “The full battery supply chain is here. Cathodes, anodes, separators, assembly lines.” This is a way to get to Europe.
German automakers BMW and Mercedes-Benz, as well as battery manufacturers like BYD in China and Samsung, a rival in Korea, were among those who received these subsidies (KS:). SDI. The average amount of subsidy has been 15% of investment.
According to government statistics, Hungary has received over 14 billion euros (about $15 billion) in direct foreign investment in its battery industry alone over the past six years.
Generally speaking, major investments are those worth more than 5 to 10 million euros, though this varies depending on factors like the number of jobs created.
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According to interviews with approximately 20 industry players and consultants in Germany, Hungary, China, and South Korea, state incentives and the opportunity for automakers and battery suppliers to work next door to each other are proving to be a strong draw.
The No. 1 CATL in the world, China’s One manufacturer of electric vehicle batteries, as well as Korean battery giants Samsung SDI and SK Innovation, told Reuters that their decision to invest in Hungary was influenced in large part by the country’s proximity to German automakers and its ability to procure separators and other components there.
To construct the largest battery plant in Europe, CATL is investing $7.6 billion in Hungary. The city of Debrecen, which is attracting an ecosystem of suppliers that includes manufacturers of brakes, battery cathodes, and industrial machinery, will host both this plant and the $2.1 billion BMW factory.
Volkswagen (ETR:) is converting its Kecskemet factory to produce electric vehicles, while Mercedes-Benz In Gyor, Audi manufactures automobiles and electric motors.
As the country faces its toughest economic environment in more than a decade, with inflation above 20%, the economy slowing, and EU funds in limbo, such large businesses could be advantageous to Prime Minister Orban’s administration.
However, numerous industry insiders claim that the Hungarian EVs project also faces significant challenges.
The large demands that massive battery plants will place on the electricity grid, which must move away from fossil fuels and toward renewables in order to meet the net-zero emissions goals of a lot of the auto industry, are a major concern, according to the people.
They added that capacity could also be hampered by the absence of battery cell manufacturing specialists in Hungary.
Reuters inquired about the EV industry but received no response from HIPA, the agency of the Hungarian Foreign Ministry that is in charge of attracting investments in everything from logistics to batteries and cars.
In light of Brussels and Berlin’s concerns about the dangers of Europe becoming overly dependent on China and other foreign powers, particularly in technologies essential to the green transition, Hungary’s welcoming of Asian battery manufacturers may be surprising.
Csaba Kilian, a representative of Hungary’s automotive association, stated that the need to increase EV production leaves the European auto industry with little choice but to source from Asian players for the time being.
“I totally concur that European producers ought to have their own sources … in any case, it’s a rivalry, and China has made great advances,” he added. ” There is an expectation to learn and adapt.”
According to estimates from Benchmark Mineral Intelligence (BMI), if current plans are realized, Europe will have a manufacturing capacity for EV batteries of 1,200 gigawatt hours (GWh) by 2031. This capacity will exceed the expected demand of 875 GWh. However, of that 1,200 GWh, Asian firms with European factories will provide 44%, followed by domestic firms with 43% and Tesla (NASDAQ:)—a pioneer in the United States. with 13 percent, as calculated by Reuters using BMI data.
According to automotive consultants at Boston Consulting Group and Berylls Strategy Advisors, the loss of Russian gas has hampered Germany’s prospects for developing a battery industry.
In addition to high subsidies and the lowest corporate tax rate in Europe—9 percent—Hungary offers an energy system that is relatively stable and is supported by nuclear energy.
According to Ilka von Dalwigk, policy manager at the European Battery Alliance, which was established in 2017 by the European Union to help establish a domestic industry, “the entire battery supply chain has come to the country.”
“There is a location for everything. She added, “It looks like it will have one of the largest production capacities in Europe when we look at the forecast for 2025 and 2030.”
“It could very well be that Hungary is actually the next big cluster in Europe for making batteries.”
An official from the EU responded to a question about concerns about technology coming from Asia by saying that the bloc, which must approve investor subsidies from member states, had a system in place to cooperate and share information on investments from non-EU countries that could affect security.
The official added that the European Commission is currently negotiating with Hungary regarding the size of the subsidy that the country will provide to CATL for the construction of the Debrecen plant.
Schaeffler, a supplier of automobiles in Germany, stated in August that, despite the appeal of Hungary’s incentives, it was on the verge of establishing its primary electric motor plant in Hungary. However, the company ultimately settled on Germany out of concern that it would send “the wrong signal” to Germans who are concerned about the loss of jobs overseas.
As factories increased, other players in the industry expressed a variety of concerns regarding potential pitfalls for the developing Hungarian auto industry, including the power grid issue.
Particularly, the production of EV batteries requires a significant amount of energy because they are necessary for the drying of materials and machine operation.
According to a Reuters analysis of data from the BP (NYSE:), Hungary’s energy sources in 2021 consisted of 80% fossil fuels, 14.5 percent nuclear, and 3.6 percent solar. Review of World Energy Statistics.
The combination presents challenges for automobile manufacturers, who will soon be required by new German and European legislation to demonstrate carbon-free credentials throughout their supply chains.
Hungarian Unfamiliar Clergyman Peter Szijjarto met senior leaders from BMW and auto providers remembering Schaeffler and Knorr-Bremse for Munich last month, in front of the German carmaker reporting it was reinforcing its interest in the country.
One of the companies that attended said that plans to improve Hungary’s logistics infrastructure and increase the amount of renewable energy used in the power grid were discussed.
According to calculations made by the German-Hungarian Chamber of Commerce, the government committed to spending approximately 135 billion forints on improving local infrastructure when BMW first announced its plan to build its Debrecen plant in 2018.
CATL told Reuters that it was thinking about working with local partners in Hungary to develop solar power.
Alexander Timmer, a partner at Munich-based Berylls Strategy Advisors who has worked on a number of automotive and battery projects in Hungary, said that the country offered an appealing package despite the risks.
He continued, “The combination of cost advantages, state subsidies, and proximity to the plants of automobile manufacturers makes Hungary more appealing to battery producers.”
