Daimler – the multinational automotive corporation behind the Mercedes brand – has temporarily suspended the expansion of its flagship car manufacturing factory in Kecskemét due to a serious decline in car demand on the global market. Hungary has close ties to German car manufacturers, which means any throwback could have a huge impact on its economy. Though the situation seemed worrisome at first, the latest statements from the car manufacturers seem to have put an end to the rumors, at least for now.
The German car manufacturing business has stumbled upon serious difficulties due to technological changes (e-cars, self-driving cars, etc.) and declining demand. This has forced them to restrict production expansion, according to Handelsblatt, Germany’s leading business newspaper.
Hungary is the third most exposed economy to the automotive industry, news site Index states. The automotive industry is key to Hungary’s economic well-being, and there’s a dark side to this. For instance, if the export market were to fall behind, it would hugely impact the economy and drastically degrade its performance. The Foreign Affairs and Trade Minister of Hungary, Péter Szijjártó, recently spoke about the enormous impact the industry has had on the country. He explained that the automotive industry accounts for 27 percent of Hungarian exports and 29 percent of industrial output. Hungary is the 20th largest car industry exporter in the world, he added. As experts often warn, any mid or long-term throwback could have catastrophic consequences.
The one to lose the most due to these measures might be Hungary – the country where German manufacturers have the greatest opportunity to expand due to a combination of relatively low wages and good infrastructure.
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Based on information Handelsblatt obtained from market sources, BMW and Daimler need to reduce costs and cut production expansion in Hungary. The article cites the Kecskemét factory as an example and points out that Mercedes is already a step ahead of BMW, who is still busy analyzing and searching for long-term solutions.
The article also points out that the German “premium trio” (Audi in Győr, Mercedes in Kecskemét and BMW in Debrecen) had big plans, especially in Hungary. In spite of this, at the Mercedes factory in Kecskemét, “projects have been postponed and driven down.” In fact, the newspaper reports that the commissioning of the second Kecskemét factory has been postponed by at least one year, according to insider sources.
While on Inforádió on Wednesday, Orsolya Ludvig, the communications director of the Mercedes-Benz factory in Kecskemét, denied Handelsblatt’s claims that Mercedes has downsized its plans in Hungary.
She emphasized that the construction of the Mercedes factory in Kecskemét wouldn’t stop; the first building, in which they’ve already invested 250 million euros, is expected to be finished soon. Discussions about what kind of products the company will produce in its new factory are still ongoing, she added. It’s natural for a market company to change its plans; Daimler is always revising its product portfolio. Their focus is not on Kecskemét, but on all of Daimler’s concerns, she insisted.
Another important point of consideration is that despite the difficulties, car production in Hungary is still worth doing mainly due to cheap labor and government support.
Photo by Sándor Ujvári/MTI