news letter Our mobile application

Weekly newsletter

Automotive Industry in Hungary Restarts Production Gradually, Effects May Still Remain

Ábrahám Vass 2020.04.24.

The automotive industry is slowly and gradually resuming production. Experts, however, agree that some effects will long remain and will cause headaches in Hungary where the economy as a whole is very much dependant on the automotive industry.

All the major factories were completely halted around March 20th, and most of the workers received base salaries during the shutdown. Upon the restart, all the factories emphasized the introduction of strict hygiene and health protection measures to ensure workers’ safety and prevent the spread of the coronavirus.

In Hungary, Audi was the first to restart production. On April 14th, only 100 workers started to bring back life to the German giant’s Győr factory which employs around thirty thousand workers. A recent agreement between the trade union and the firm also guaranteed that there wouldn’t be lay-offs.

Mercedes will also gradually restart production in Kecskemét on April 28th. Like Audi, the trade union and the company leadership recently came to an agreement that will ensure the workplace and salary of the 4,400 employees.

Suzuki plans to reopen its car plant in Esztergom on April 29th, although with only a single shift.

And, apparently, Opel in Szentgotthárd will be the last in line. It recently announced preparations for the relaunch without specifying an exact date.

Tire companies and Bosch to start lay-offs

That the pandemic will not depart unnoticed, potential and already-announced lay-offs indicate. Both Continental and Hankook announced dismissals. In the case of the former, as of now, the number of fired workers from its Vác and Makó sites will range between 270 and 700.

Although Hankook‘s factory in Rácalmás also restarted production on April 14th, it will begin with low capacity. The South-Korean company also began lay-offs, last month already dimissing 50 people, and dismissals will go on gradually.

In addition, Bosch also recently announced they would let more than 800 workers go from its Hatvan factory. According to their reasoning, orders fell by 70-75%, and they blame this on the spread of the coronavirus and changes in the automotive industry.

Effects of the pandemic will remain for long

While restarting production is hopeful news, problems caused by the recession won’t just go away as they came, since the Hungarian economy very much depends on the automotive industry and is vulnerable to its global changes. Only the four aforementioned major companies employ more than twenty thousand people, not including their external providers and BMW’s soon-to-be-built plant in Debrecen. According to a 2018 Central Statistical Office report, the automotive industry’s share of the manufacturing output was over 28%, very much contributing to the considerable economic growth of previous years. In addition, signs of a potential recession in the automotive industry could be felt well ahead of the coronavirus outbreak.

Hungary’s Economy Engine Automotive Industry to Pull the Brakes?

Automotive industry expert Alexander Brenner told economic site Portfolio, that for now, a sudden increase in demand cannot be expected and European car production may fall this year by as much as 20-40% in comparison to 2019. This decline is unlikely to be made up next year either, and demand could return to normal only in a few years, he predicted.

While economic investigative site G7 notes that Hungary is rather lucky, as Germany could restart production earlier than for example Italy, Spain, or France. According to the site, since the Hungarian government hasn’t provided substantial help to companies or workers (it only gives money in exchange for work, but working possibilities are limited due to the measures), it puts a lot of pressure on the factories and workers.

featured image by Sándor Ujvári/MTI