BYD picks Hungary for its first European car plant

BYD plans to build its first European passenger car factory in Hungary, part of a push by the Chinese electric-vehicle powerhouse to challenge Tesla as the dominant maker of battery-powered cars.

The plant in the southern city of Szeged will produce EVs and plug-in hybrids for the European market and create thousands of jobs, BYD said.

BYD's choice of Hungary for the factory comes after European countries including Germany and France lobbied the automaker hoping to win the investment and employment that would come with an auto plant.

The company sold just over 13,000 cars in Europe through November, according to market researchers Dataforce. The Atto 3 was its best-selling model with nearly 11,000 units sold.

The factory is "the first step towards serious competitive entry, and sets a two-to three-year timeline ticking," Bernstein analysts said in a note. "BYD is stepping up its overseas expansion as its domestic market share sees a peak."

BYD's plant in Hungary will likely have a capacity of around 200,000 cars annually, Bernstein analysts said, with BYD indicating a phased ramp up.

BYD and the Hungarian government did not disclose the size of the investment, and they did not give a timeline for the completion of the project.

Foreign Minister Peter Szijjarto said Hungary will provide subsidies for the BYD plant, though it will only publish the amount after receiving the European Commission’s approval. "This is set to be one of the biggest investments in Hungarian economic history," Szijjarto said.

In a decree published Thursday, Prime Minister Viktor Orban assigned 46.3 billion forint ($133 million) in financing from the budget to upgrade road, rail, power, gas and water infrastructure around an industrial park in Szeged, without naming BYD in the document.

BYD has a plant in the city of Komarom in northwest Hungary that produces electric buses.

Hungary has become one of the leading European hubs for the EV industry. The country has received an estimated 20 billion euros ($22 billion) of EV-related investments in the past five years, including a 7.3 billion-euro battery plant that China's Contemporary Amperex Technology is building in the eastern city of Debrecen.

Mercedes-Benz, Audi and Suzuki have car plants in Hungary. BMW's new Hungarian plant is scheduled to start building Neue Klasse electric cars in 2025.

Chinese brands such as BYD, SAIC Motor's MG brand and Nio have been expanding in Europe to become less dependent on their home market, where oversupply and a price war Tesla touched off over the last year are weighing on profits.

While Chinese manufacturers' market share in Europe is still low, the country’s dominance in plug-in vehicle production has put the country in position to challenge Japan for the global lead in automotive exports.

BYD's Hungarian factory might help the automaker avoid any import tariffs resulting form the European Union's anti-subsidy investigation into Chinese EVs.

BYD along with Shanghai-based SAIC and Zhejiang Geely Holding Group have been made a focus of the EU investigation. Beijing has repeatedly criticized the move, calling it a breach of World Trade Organization rules. Europe is the biggest EV export region for China, receiving more than 600,000 vehicles as of November this year.

BYD is expanding in Europe in part because it can charge higher prices there. Its Dolphin compact car, its cheapest model in Europe, starts at 35,990 euros in Germany, more than double the asking price in China.

Bloomberg and Reuters contributed to this report