BUDAPEST -- Hungary's government has approved 11.2 billion forints ($61 million) of direct subsidies for Volkswagen AG's Audi's expansion in the country and another 5.5 billion forints for General Motors Co.'s Opel.
The two carmakers announced expansion plans at their plants in the western Hungarian towns of Gyor and Szentgotthard worth a combined 1.4 billion euros ($2 billion) last year, giving a boost in coming years to the central European country's export-driven economy.
Economy Minister Gyorgy Matolcsy said that the two projects would create 2,634 new jobs directly and a total of 17,500 when taken together with new workplaces created at domestic suppliers.
"These investments will produce nearly 100 percent for exports, which also means that Hungary takes a step forward in regional automotive competition," Matolcsy said on Wedenesday.
After GM announced plans to boost production in at its Szentgottard plant, which builds gasoline engines and transmissions, Audi said last year it would lift output to 125,000 vehicles a year once its expanded plant at Gyor, in northwest Hungary, begins full operations from 2013.
The automaker currently builds the A3 cabriolet, TT coupe and TT roadster at the plant and plans to produce the RS3 sportback and A3 sedan there too.
Daimler AG's new 800 million euro Mercedes plant in the central town of Kecskemet is also expected to start production in 2012.
Matolcsy said these three projects combined would add 2 percentage points to the contribution of the car sector to Hungarian GDP, lifting it to about 5 percent of economic output from 3.1 percent.
That will also boost the contribution of car exports to 16 percent to 18 percent of all Hungarian exports in the years ahead, he said.