• A new industry is born: EV battery manufacturing

A new industry is born: EV battery manufacturing

25 April 2023

While just 0.1% of all automobiles sold in 2011 were electric, by 2022 this number had climbed to 10%, and by 2030, 55% of vehicles sold are expected to be electric. As battery manufacturing is a crucial component of EV production, there is intense rivalry for these capacities that must be built-up in record time to keep up with the demand. An economical FOMO effect is almost evident as countries race to attract investments in this new industry that will literally power the future.

Hungary’s position in the EV battery race

Because of its central geographical location, investments in cell and battery production facilities, the presence of significant automobile manufacturers, and a strong supplier sector, Hungary is in a perfect position on the European battery map. Hungary, along with Germany, is one of Europe's leading producers of lithium-ion batteries. Hungary advanced to the forefront of battery manufacturing rather quickly by not waiting for the EU to reduce its capacity or for the planned massive investments to come off. Instead, we made room for the world's leading Asian corporations.

The Government of Hungary offers considerable incentives to EV battery makers in the form of VIP Cash Grants and Development Tax Allowances in order to ensure Hungary's competitiveness and attract even more large investments in the future.

Strengths and weaknesses of Hungary regarding the EV battery race

According to the National Battery Industry Strategy 2030 the supportive political environment, the battery manufacturing industry, which includes many international businesses, and the extensive usage and integration of batteries are the strengths of the Hungarian battery value chain. The prospects of Hungary for producing battery components are positive, owing mostly to increased recycling efforts and the utilization of vast lithium-rich geothermal reserves in the Carpathian Basin.

The Strategy identifies the low degree of international collaboration, the disparities between academic and industry R&D demands, the poor level of integration of actual foreign direct capital investments into the local ecosystem, and the constraints of human adaptability to rapid technological changes as weaknesses and hazards.

Hungary's long-term policy is to encourage the development of a Hungarian battery value chain based on services and production with high Hungarian added value, as well as joint value production by international and national players, and is committed to ecologically and socially sustainable battery production that is rooted in the European ecosystem.

Latest news regarding EV battery investments in Hungary

On 28 February 2023 the European Commission has found Hungary's €89.6 million measure in favour of Samsung SDI to be in line with EU State aid rules. The investment aid will support the expansion of Samsung SDI's battery cell production facility for electric vehicle in Göd. The aid will contribute to the development of the region and to job creation, whilst preserving competition.

On 9 March 2023 the EU Commission has amended the Temporary Crisis Framework into the Temporary Crisis and Transition Framework (‘TCTF’). The TCTF includes a new form of state aid: “Aid for accelerated investments in sectors strategic for the transition towards a net-zero economy”. The aid is granted to incentivize the production of relevant equipment and its components and raw materials for the transition towards a net-zero economy (namely batteries, solar panels, wind turbines, heat-pumps, etc.). The most notable development is that this aid may be granted regardless of the regional state aid map: the general rule is that the aid intensity may not exceed 15% of the eligible costs and the overall aid amount may not exceed EUR 150 million per undertaking per Member State. This would mean that battery manufacturing and related investments may be eligible for 15% aid intensity in Budapest (as well as in other developed regions of Europe). It is widely expected that the Government of Hungary will amend the Government Decree 210/2014. (VIII. 27.) on the use of the Earmarked Scheme for Investment Promotion to include this new form of aid in its bid to attract new investments in the battery manufacturing race.