The Automotive Industry in Hungary

The automotive industry is one of the most important branches of Hungarian manufacturing. Recognizing this, the Hungarian Government has ranked motor vehicle manufacturing and its sub-sectors among the high-priority sectors of the domestic economy. 

In 2005, exports of motor vehicles and automotive components in the country were worth EUR 10.6 billion. The motor companies – especially OEMs and Tier 1 firms – manufacture mainly for export. Together, the more than 630 automotive companies in Hungary account for 25% of total exports. 

“Automotive production drives economic growth all over the world, since it uses the
most advanced materials, technologies, organisational methods and business practices,” says István Lepsényi, President, Association of the Hungarian Automotive Industry (2001–2005), and Vice-president, International Organization of Motor Vehicle Manufacturers (2002–2006).

“It’s not just the vehicle manufacturers who are developing dynamically in Hungary (for example, Suzuki’s doubling of capacity in only two years), but the system and main-unit suppliers as well. Their economic activity, both in terms of current sales and the revenues anticipated from increasing R&D activities, has already surpassed the total sales and costs of the vehicle manufacturers. The global companies’ manufacturing bases and R&D centres in Hungary are not only spreading the Hungarian reputation for knowledge, creativity and productivity internationally, but integrating an ever-increasing share of Hungarian SMEs into the pulling-sector of the world economy, and motor vehicle manufacturing.” 

Automotive Industries spoke to Gyorgy Retfalvi, General Director, Hungarian Investment and Trade Development Agency (ITDH).

AI: It is said that Hungary is a favourable location for investments in the automotive industry. Can you expand on this – what makes it so ideal? 

GR: We are building on a strong foundation of innovation. The automotive industry is the success story of the Hungarian economy for many reasons. There is a tradition of innovation in Hungary. For example, János Csonka invented the carburettor in 1890, Ferenc Pavlics created the moon walker and Mars vehicles from 1961–1988, and Ferenc Anisits managed BMW diesel engine development from 1981–1999. 

Hungary is also a central location, and as such is a possible hub for Europe. We have reasonable and competitive labour costs combined with the highest productivity in CEE, as well as an excellent local supplier network. With its location in the heart of Europe, Hungary is an ideal bridgehead for investors seeking to expand their operations in the Central and Eastern European region. As a part of the “Detroit East” countries, Hungary can supply the manufacturers and the customers in the neighbouring Central and Eastern, Western and Southern European countries. 

The country is a crossroads where the four points of the compass meet. Companies that have invested in Hungary have found a qualified, creative, motivated, flexible and hardworking labour force with the highest productivity rate in Central and Eastern Europe. The high level of political and economic stability is an expression of Hungary’s successful transition to a modern market economy. You will find effective measures for stimulating investment, preferential tax incentives and liberal laws supporting the establishment and operating of businesses. Thanks to Hungary’s EU membership, investors settling in our country find themselves on the south-eastern borders of a market of 455 million people. 

AI: Tell us about some of Hungary’s latest Greenfield investments by the automotive industry. 

GR: The Japanese Bridgestone has brought its breakthrough BIRD production system out of Japan to Hungary. By investing EUR 195 million in Tatabánya, the company is building a construction facility capable of a turnout capacity of 8,000 tyres per day with 185 employees. The Korean Hankook Tire will invest EUR 528 million by 2010 in its Dunaújváros facility that will produce 10 million tyres per year and employ 1,500 people. The Japanese Asahi Glass has invested USD 162 million to build its facility in Tatabánya that will employ 600 people to produce safety glasses. The Japanese Ibiden has invested more than EUR 100 million in the first phase in its factory in Dunavarsány and will employ 1,200 people to produce ceramic filters for diesel engines. The German ZF Hungary is investing EUR 74 million in Eger to build its second manufacturing operation in Hungary – on a 15,000 sq m premises with 1,400 employees, it will manufacture 1.2 million steering gears, 1.7 million A/C pumps, and 120,000 gearboxes per year. 

AI: Can you name some of the major foreign companies that have invested in Hungary so far?

GR: Many multinational companies have located their manufacturing, service operations, European headquarters and R&D centres in Hungary, which has translated to nearly 54 billion Euros of foreign direct investment to date. Audi, Suzuki, GM, Asahi Glass, Bosch, Bridgestone, Delphi Calsonic, Denso, Ibiden, Knorr-Bremse, Lear, Michelin, Visteon and Hankook Tire, amongst others, have already invested in Hungary. Manufacturers, such as Suzuki and Audi, are continuously expanding their capacities and their workforce so that they meet growing demand. This is one of the reasons why 14 out of the world’s top 20 Tier 1 suppliers have already established their operations in Hungary. 

AI: What is the level of training of engineers in Hungary, and how does this bear on the automotive industry? 

GR: The superb network of technical colleges and universities in Hungary provides excellent training and education for engineers. The automotive industry today employs approximately 97,000 people in Hungary, out of which 3,500 are highly qualified engineers. Thereof, more than 50% of them are mechanical engineers, 11% are information-systems engineers, 10% are electrical engineers, 9% are automotive engineers and 39 % are quality-assurance engineers and chemical engineers. Almost 20% of the working engineers are engaged in product-improvement, while the others are active in technological development, production, quality assurance and sales. 35,601 engineers study technical sciences in Higher Education in Hungary

AI: What role has Foreign Direct Investment (FDI) played in Hungary’s automotive industry?

GR: The automotive industry is one of the economic sectors that has benefited the most from the heavy foreign direct investment inflows after the change of regime. A quarter of total FDI in manufacturing is invested in the automotive industry. Like the whole manufacturing sector, the automotive industry is FDI driven and mainly pulled by the foreign companies that have invested in Hungary since the 1990s. Simultaneously, the small and medium-sized local automotive companies have become stable and strategic partners of local based and Western-European car manufacturers. Owing to the quick introduction of modern corporate management and quality assurance systems, productivity in Hungary reaches the Western-European average.

AI: Tell us a little bit about The Association of the Hungarian Automotive Industry.

GR: The Association was founded in 1998 with the participation of ten automotive companies. Today the Association has 26 members. Its main activities are to represent the interests of Hungarian car and main unit manufacturing companies. It also represents the international interests of Hungarian production companies in the Association of European Motor Vehicle Manufacturers (ACEA) and the International Organisation of Motor Vehicle Manufacturers (OICA). The Association helps to formulate domestic legislation and harmonise national law with EU directives and regulations in areas concerning the automotive industry.

Visit www.itd.hu for more information.