According to Chinese media, Hungary offered €800 million in grants, tax breaks, and infrastructure support to the €7.4 billion greenfield investment by the world's largest EV battery maker CATL, which is building its second European production facility in the eastern Hungarian industrial hub of Debrecen.
The alleged size of the government subsidy demonstrates Hungary's aggressive FDI wooing strategy in recent years, particularly from Asia and in the battery sector, which the government sees as strategic.
After China, the United States, and Germany, Hungary has the world's fourth-largest capacity for producing electric batteries. To diversify its reliance on traditional vehicle manufacturing, the Hungarian government sought to attract the world's leading EV battery producers and suppliers.
According to a Facebook post by Marton Tompos of the liberal Momentum party, Hungary began negotiations with CATL two and a half years ago, when the company was still unsure of the location of its giga investment.
Poland and Serbia were also in the race, but then the Hungarian government unveiled a lucrative offer to "save the investment". The Orban government offered a total of €800 million in grants, tax breaks, and infrastructure incentives. According to Hungarian media reports, the financial assistance, including infrastructure investments around the site, is worth around €277 million.
The government has yet to reveal the specifics of the assistance, citing an ongoing notification process with the European Commission, which will determine whether any subsidies were excessive.
The world's leading battery manufacturer, which controls roughly one-third of the global market, announced in August that it will build a 100 GWh plant on 221 hectares in Debrecen's industrial park, not far from BMW's new e-car factory under construction, creating 9,000 new jobs. CATL's project alone is worth more than the total sum of investments made in this field by Asian manufacturers.
Thus according Chinese reports, Germany's battery production capacity will increase to 369 GWh by 2031, followed by Hungary with 207 GWh. Debrecen alone will account for more than half of that capacity, with 130 GWh, as German premium carmaker BMW also announced plans to build an EV battery plant alongside an existing car plant, doubling its initial €1 billion investment.
Debrecen, Hungary's second-largest city, has transformed itself into a major automotive hub, attracting billions of euros in investment. It is home to top Tier 1 suppliers such as ThyssenKrupp and Schaeffler Group from Germany, as well as EV battery suppliers such as EcoPro.
The broader region of Debrecen near the Romanian border is one of Hungary's less developed areas; investments here receive 50% aid intensity, the highest in the EU.
Debrecen was named the best European small city in terms of investment promotion strategy by fDi Intelligence, a Financial Times research and analysis agency, in 2018. It was named one of the top ten best investment promotion destinations in the world in 2021, alongside cities such as New York, Hong Kong, Berlin, and Dubai. Debrecen was named 'Emerging City of the Year' at the CEE Business Services Awards 2021.
The environmental impact of the construction has been heavily criticised. Local residents have been outspoken in their opposition to the factory during public hearings and protests.
As per studies, the Debrecen factory will require 60,000 cm of water per day, enough to fill 87,600 Olympic swimming pools in a year, more than the city's 200,000 consumption, and annual electricity consumption will total 4 GW, or a quarter of Hungary's sole nuclear power plant's production.
The gigafactory's construction has become a hot political topic, with opposition parties planning to collect signatures for a referendum on the project. However, there is a schism between them. The Green Party LMP proposed a national referendum initiative to limit the construction of a battery factory in Hungary to areas where the local population agrees. Both Liberal Momentum and the radical right-wing Our Homeland (Mi Hazank) have pledged to hold a local referendum on the issue.