The European Union Commission has reportedly opened a preliminary probe investigating whether China provided unfair subsidies to support Chinese EV automaker BYD in establishing a new production facility in Hungary. This news comes one day after China delayed a decision on BYD’s planned production facility in Mexico, demonstrating growing trade tensions between countries worldwide.
As we pointed out yesterday, BYD has the makings of being the name to beat in the EV industry. The Chinese auto conglomerate has put a full-court press on the market, expanding its lineup of available models and marques ranging from ultra-affordable to super luxe while stoking its international presence by entering new markets in North America, South America, and Europe.
Since 2023, we’ve known that BYD’s expansion plans to those regions include local production footprints, including EV production plants in Brazil, Mexico, Indonesia, and Hungary. For the latter, BYD announced a preliminary land purchase in Hungary in early 2024, which will become home to a new facility capable of producing 200,000 EVs annually for the EU market, following a phased expansion program.
Just yesterday plans for BYD’s additional plant in Mexico were put on hold while China’s Ministry of Commerce further evaluated the situation. The ministry cited fears that the Chinese automaker’s proprietary EV technology could make its way north to the United States for competitors’ benchmarking.
Contrary to North America, BYD’s progress in Europe appears to be progressing. Still, its plans may face another snag as the EU Commission is now investigating whether China provided unfair subsidies to the automaker, which may face several repercussions if true.
BYD facing fines, reduced capacity in Hungary with probe
As reported by The Financial Times, the EU Commission in Brussels has entered the early stages of an investigation into BYD, specifically whether or not the Chinese automaker received unfair subsidies from its local government to build its plant in Hungary.
The probe will further stoke tensions between the EU and Beijing amidst growing trade tensions worldwide. It also undermines Hungary’s Prime Minister Viktor Orbán, who has established himself as an ally to Putin and Trump, especially regarding the war between Russia and Ukraine, much to the dismay of the EU.
Orbán hosted Chinese President Xi Jinping in Budapest last year following several instances of wooing Chinese companies to build in the country, including BYD, which intends to invest 4 billion euros and create up to 10,000 new jobs in the region.
EU officials, however, have pointed out that BYD used Chinese labor to erect the factory in Hungary and plans to import most of its EV components, including batteries, from overseas. As such, the EU argues this will create little economic growth for Hungary and the European Union. This investigation follows a previous probe from the EU Commission last year that determined that several Chinese automakers, including BYD, received unfair subsidies from China, resulting in new tariffs on imports for those companies.
If the EU’s investigation confirms BYD received unfair aid from China to build in Hungary, the automaker may be forced to sell off assets, reduce its production capacity, repay the subsidy, and even pay a fine to the EU for non-compliance.
Hungary’s Minister for European Union Affairs, János Bóka, told The Financial Times that Budapest had not been informed of the EU’s recent probe. Still, he is unsurprised as any investment in the country “appears on the Commission’s radar very quickly” given its geographical proximity to Ukraine. Bóka also said Hungary’s capital remains “calm,” stating that it carefully vetted state aid, including the likes of BYD.
This story is ongoing.
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