Although the European new energy market is mainly driven by Western and Northern Europe as the "strategic frontline", with the impact of factors such as the reduction of new energy subsidies, the strategic frontline will gradually shift eastward to Central Europe.

At last year's World Battery Conference, Péter Szijjártó, Minister of Foreign Affairs and Foreign Economic Relations of Hungary, stunned reporters with his remarks: "Hungary now ranks fourth in battery production and is poised to become the second largest in the world, second only to China."

Hungary, an inland country in central Europe with a population of less than 10 million and a land area of only 93,000 square kilometers, wants to become the next automotive manufacturing hub? But how can such a tiny inland country in Europe claim to leapfrog to become the second largest in the world?

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And neighboring Austria is not to be outdone.

Austria is famous for its beautiful scenery, but most people are unaware that its automotive industry is highly developed, contributing nearly 10% to Austria's GDP. Major automakers have clustered their production bases here, with over 700 automotive-related companies generating an ultra-high annual revenue of €25.5 billion, with 90% of products exported. Austria also boasts a significant number of hidden champions in the upstream and downstream automotive components industry.

Despite their subtle competition, both Hungary and Austria have extended an olive branch to Chinese companies in developing their new energy vehicle (NEV) industries.

Similarly located in central Europe, the Czech Republic, while geographically not as advantageous, has exhibited unique charm and potential in its automotive market.

In terms of market share, German brands such as Volkswagen, Škoda, and Audi dominate the Czech market, consistent with their performance in other European countries. Škoda, in particular, as a Czech brand, enjoys high recognition in the domestic market due to its cost-effectiveness and strong brand image.

Moreover, Japanese brands like Toyota and Honda have also achieved notable success in the Czech market, especially Toyota, which has won widespread consumer favor for its reliability and economy. Unlike Hungary and Austria, however, Korean brands have been more aggressive in developing their presence in the Czech market.

Overall, amidst the trend of electrification, European countries, including Austria, Hungary, and the Czech Republic, have generally experienced a slowdown in the development of their automotive industries. Despite Europe's relentless advocacy for addressing global climate change and promoting emission reduction measures, the production and sales of electric vehicles in Europe have faced certain difficulties.

"Heart of Europe"

Milan Kundera once said, "Central Europe is not a country, but a culture with imaginary boundaries."

The Blue Danube winds its way east through twelve countries including Germany, Austria, the Czech Republic, and Hungary, eventually emptying into the Black Sea. This second-longest river in Europe not only brings abundant water resources and stunning landscapes to the riparian countries but also drives economic development along its banks.

The automotive industry is one such beneficiary.

Hungary, located in central Europe and hailed as the "Heart of Europe," boasts a thriving automotive industry, earning it the nickname "Detroit of Europe."

While neighboring Austria's GDP is more than 2.6 times that of Hungary—around €403.1 billion in 2021 with a per capita GDP of approximately €45,000, compared to Hungary's €154.1 billion and per capita GDP of roughly €16,000—

the automotive industry holds a much more prominent position in Hungary than in Austria. Currently, the well-established automotive manufacturing sector accounts for one-third of the country's manufacturing output and one-fifth of its total exports.

As early as 1949, Hungary began exporting buses, trucks, and coaches to China to varying degrees. After joining the European Union on May 1, 2004, Hungary quickly became an important destination for the transfer of German automotive production.

Data shows that there are over 740 automotive and components manufacturing enterprises in Hungary, with 14 of the world's top 20 automakers having established vehicle or component production bases here. Notably, only three countries worldwide—China, Germany, and Hungary—host factories for all three luxury automakers: Mercedes-Benz, Audi, and BMW. Hence, Hungary is known as "Detroit of Europe" within the industry.

Furthermore, more than half of the world's top 100 automotive component manufacturers have established factories in Hungary.

As a country with equally rich historical roots, Austria's automotive industry is also renowned.

120 years ago, Austrian Sigfried Marcus was one of the inventors of the automobile. Around 1900, the Greif brothers of Vienna invented the first car with a front-mounted engine. In 1934, Steyr-Daimler-Puch introduced the first aerodynamic car to the market. Additionally, Austrian Ferdinand Porsche, known as the father of Porsche and the Volkswagen Beetle, is widely recognized.

According to Austria Wirtschaftsservice (aws), Austria's automotive manufacturing and components industry comprises over 700 enterprises, supporting around one-ninth of Austria's total employment when combined with related industries.

In addition to renowned automakers and component suppliers like Magna Steyr, Miba, and AVL List, Austria boasts numerous innovative small and medium-sized component enterprises that form the backbone of the country's automotive industry due to their high technical proficiency and flexibility.

It is worth mentioning that despite being hailed as the center of the "Silicon Valley of the automotive industry" in Central Europe, Austrian automakers must look beyond their domestic market due to its small size.

Currently, Austria's automotive industry is the second largest pillar of the country's export economy, surpassed only by machinery manufacturing. The primary export destinations are Europe, followed by the Americas and Asia, with Germany, Austria's largest trading partner, dominating the European export market.

While Austria and Hungary's automotive industry clusters are key to their deep integration into the global automotive system, most people are more familiar with the Škoda brand when it comes to the Czech Republic's automotive industry.

Škoda is one of the four oldest automakers in the world, and in the long history of the Czech Republic, Škoda has been a brand deeply intertwined with the country. As a pillar enterprise in the Czech Republic, Škoda holds a 1/3 market share in the domestic automotive market, surpassing even Volkswagen in Germany and PSA in France.

With a history spanning over 100 years, the Czech automotive industry currently produces over 500,000 vehicles annually, contributing approximately 13.3% to the country's total industrial output. The total export value accounts for about 1/5 of the Czech Republic's total exports, with 88% of exports going to the European Union. The entire automotive manufacturing industry provides approximately 120,000 jobs, a 40% increase from 15 years ago.

Refusing to be all talk and no action

Despite Europe's relentless efforts to promote the development of the electric vehicle (EV) market in recent years, it has encountered unprecedented bottlenecks, with sales continuing to decline. However, Hungary has significantly outperformed the broader European EV market. Currently, Hungary has 60,000 EVs on the road.

In 2023, Hungary sold a total of 213,400 new vehicles, including 4,846 battery electric vehicles (BEVs), up 28.7% year-on-year; 4,693 plug-in hybrid electric vehicles (PHEVs), up 17.5%; and 37,231 hybrid electric vehicles (HEVs), up 8.5%.

At the end of last year, the Hungarian government proposed a €90 billion forint support plan for EVs, providing subsidies to companies producing NEVs and individuals purchasing EVs. While this amount may seem modest at around €237 million, unlike Germany, France, and Italy, which have been gradually phasing out incentives, Hungary has seriously implemented this subsidy program.

Simultaneously, Hungary plans to build over 100 new public charging stations outside of Budapest and offer loan incentives to businesses or individuals constructing these stations. By the end of 2023, there were 2,507 public charging facilities in operation in Hungary, a 12.5% year-on-year increase.

Notably, Hungary will hold the rotating presidency of the European Union from July to December this year.

Hungary has stated that during this period, it will formulate an action plan to enhance the competitiveness of European EVs, introduce new EU vehicle purchase incentives from both manufacturer and consumer perspectives, establish new standards to support the trading of used EVs, encourage private capital investment in charging stations, and construct new fast-charging facilities along trans-European transport networks and at gas stations.

The development of NEVs in Austria has exceeded expectations at times.

However, government policy support and subsidy measures have played a crucial role. Austria has set a target of one million EVs on the road by 2030 and has extended a series of incentives, including purchase subsidies, tax benefits, and charging infrastructure construction. These policies have significantly boosted EV sales, increasing their share in the new car market year after year.

Major Austrian automakers have also actively adapted to the trend, developing advanced technologies and achieving certain results in NEV research and development.

For example, AVL List has developed an extended-range engine that combines an internal combustion engine with a generator, reducing battery size, lowering costs, and extending EV range. Fronius has developed energy cell technology that converts excess electricity into hydrogen for storage and back into usable energy when needed. Plansee focuses on developing fuel cell components. Many research projects also use green waste such as straw or wood as raw materials to develop second-generation biofuels...

However, despite Austria's attractiveness to investors in areas such as logistics, it is constrained by the limitations of its domestic market. Therefore, Austria has focused more on research and development, particularly in the fields of automobiles, autonomous driving, information and communication technology, and life sciences.

Similarly, in recent years, the Czech government has vigorously promoted the adoption of NEVs through a series of policies and incentives. For instance, it offers purchase subsidies, tax benefits, and investments in charging infrastructure to encourage consumers to switch to electric mobility.

At the same time, the Czech automotive industry is transitioning to electrification.

It is worth noting that the Czech Republic's progress in charging infrastructure cannot be ignored. As the Czech Republic's geographical location in central Europe makes it a transportation hub between eastern and western Europe, the construction of cross-border charging networks has become a significant trend.

Located at the crossroads of Europe, the Czech Republic is collaborating with neighboring countries like Germany, Austria, and Poland to build cross-border charging corridors, offering seamless charging experiences for cross-border EV users. This regional cooperation not only enhances EV convenience but also promotes economic interaction and technological exchanges among countries, strengthening the Czech Republic's strategic position within the European transport network.

Despite the current challenges facing the European EV market, there is a general consensus that the outlook for EV development in Europe remains promising.

As technology advances and costs decrease, EVs will become increasingly competitive. The European Union's commitment to green transportation will also provide long-term growth momentum for the EV market. However, to overcome current difficulties, European automakers and governments must collaborate to address market challenges.

Who will be the first to seize the opportunity?

According to the Austrian newspaper Der Standard, despite the EU's imposition of special tariffs on Chinese-made EVs, many brands are still establishing a foothold in Austria. For example, the city of Amstetten will soon operate BYD-produced city buses.

However, the number of new BYD vehicles on Austrian roads is still limited. From 2020 to May 2024, Austria saw approximately 25,000 new Tesla vehicles, 20,000 Volkswagen, and 14,600 BMW vehicles take to the roads. Among Chinese brands, MG had around 4,700 vehicles, and BYD had approximately 2,200.

Although BYD entered the Austrian market only about a year and a half ago, it sold 1,024 vehicles last year and 1,834 in the first half of this year, making it the third-ranked EV brand in Austria after Tesla (4,442 vehicles) and BMW (3,557 vehicles). In addition to BYD and MG, other Chinese automakers such as FAW Jiefang, NIO, and Great Wall Motors are also conducting business in Austria.

René Treichl, Director of the Austrian Business Agency, said, "Chinese automotive brands still have significant room for growth in the EV sector. They can not only tap into the emerging EV market in Austria but also use it as a springboard to expand into the entire European EV market."

Hungary is even more ambitious about developing EVs.

As early as 2016, Hungary formulated an EV development plan. As a crossroads connecting East and West, Hungary has leveraged its geographical advantages to the fullest.

Notably, unlike most European countries, the Hungarian government pursues a relatively independent foreign policy and an active approach towards China. This political friendliness has made Hungary an attractive base for Chinese automakers seeking to enter the European market.

BYD established an electric bus manufacturing plant in Hungary in 2016, primarily serving Hungarian orders. To date, BYD electric buses account for nearly 42% of newly deployed buses in the country. This year, BYD decided to build its first European NEV passenger car factory in Hungary, marking one of the largest and most significant investment projects in Hungarian history.

"Currently, Chinese automakers building factories in Hungary can circumvent some EU trade barriers, reduce logistics costs, respond more quickly to local market feedback and demands, and explore overseas production and sales models," said industry insiders. Many Chinese automotive supply chain companies have also chosen Hungary due to its unique policy and tax advantages.",

So investing and building factories in Hungary has become a new trend in recent years.

In September 2022, NIO's Energy Europe Factory, which was invested and built by NIO in Hungary, was put into operation. Covering an area of about 10,000 square meters, the NIO Energy Europe Factory is NIO's first overseas factory and the European manufacturing, service, and research and development center for NIO's power supply products. It provides battery swap stations for the entire NIO network in Europe.

At the same time, some Chinese power battery enterprises have successively settled in Hungary. In March 2022, EVE Energy announced that it would invest and purchase 45 hectares of land in the Debrecen Industrial Zone, Hungary, to build a factory for the production of new cylindrical power batteries. Subsequently, EVE Energy announced that its subsidiary had obtained a fixed-point order and would supply large cylindrical lithium-ion battery cells for BMW's "Neo" models.

On August 12, 2022, Contemporary Amperex Technology Co., Limited (CATL), the world's top battery installation capacity, announced that it would invest 7.34 billion euros (57.986 billion yuan) to build a battery factory in Debrecen, Hungary, making it the largest external investment in Hungarian history.

Material enterprises upstream in the power battery supply chain, such as ENJEE, are also entering Hungary.

Data shows that of the total foreign direct investment in Hungary of over 13 billion euros in 2023, China's investment reached 7.6 billion euros, accounting for 58% of the total. This has created over 10,000 jobs in Hungary and marks the second time that China has become Hungary's largest source of foreign investment after 2020.

If Chinese automakers are clustered in Austria and Hungary, Korean brands are eyeing the Czech Republic.

According to foreign media reports, the Hyundai Motor Group (including Kia and Genesis) hopes to leverage its plant in the Czech Republic and its latest low-cost electric vehicle plan to gain an advantage in this "battlefield" of the world's second-largest electric vehicle market.

Hyundai Motor Chairman Chung Euisun recently visited the company's Nosovice plant in the Czech Republic. He stated that despite facing certain difficulties due to changes in the European electric vehicle market, there is a will to accelerate the entry into the European electric vehicle market.

The Hyundai Motor Czech plant has been in operation for 16 years since mass production began in November 2008, exporting most of its production, including the i30 and Tucson, to neighboring European countries. Last year, it produced over 340,000 vehicles, ranking third among Hyundai Motor's overseas production plants after India and the United States. Currently, more than half of the vehicles sold by Hyundai Motor in Europe are produced at the Czech plant.

Meanwhile, the Czech plant has been producing the Kona EV since 2020 and has emerged as a leading electric vehicle production base in Europe. The plant's electric vehicle sales are expected to reach a cumulative total of 500,000 by the end of this year.

Previously, many European automakers generally expected 2025 to be a critical juncture in the European new energy vehicle market. Although this market was previously dominated by Western and Northern Europe as the "strategic frontline," with factors such as the decline in new energy subsidies, the strategic frontline will gradually shift eastward to Central Europe.

As the market share of new energy vehicles from countries like China and South Korea in Europe has risen from less than 1% before 2022 to 8% now, new players have opened the eyes of European consumers. This change is advancing layer by layer from Central Europe, and of course, at a deeper level, multilateral cooperation has also achieved mutual benefit and win-win results, promoting cooperative development.

Hungary has now entered its six-month term as the President of the European Union. The various games that will be played between multiple parties and the EU will still significantly impact the localization process of Chinese enterprises entering the European market in the future. During this period, Chinese automakers must do everything possible to expand their market share in Europe and seize the right to speak in the future European market.

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