Hungary’s Prime Minister Viktor Orbán has a plan: to make Hungary great in EV battery production. To realize this goal, his government announced a record €7.3 billion Chinese electric vehicle (EV) battery plant investment in 2022, which is already under construction. According to the Hungarian government, the investment project will create jobs for locals, be environmentally sustainable, and make the country more competitive in a future global economic order dominated by e-mobility. However, academic experts, NGOs, and even mayors from Orbán’s ruling party have sounded the alarm about the lack of open discussions and transparency. They also point to its potential environmental and health impacts—and dubious economic benefits.
On October 2nd, 2023, members of the opposition Momentum party visited Orbán’s family home in Felcsút, in central Hungary, and carried with them a bunch of barrels containing battery production waste. On the barrels, a Chinese-language note “dianchi zhimindi 电池殖民地” (“battery colony”) was visible. On the fence of Orbán’s home, someone had hung a poster that asked, “May a battery plant also come here, Mr. Prime Minister?”. The Orbán government’s approval of the construction of numerous battery plants has been controversial, with critics accusing the authorities of ignoring environmental and social implications. While not all these EV battery plant investments have come from China, the most significant of them was the recently announced €7.3 billion plant that will be built by the China-based Contemporary Amperex Technology Co., Limited (CATL) in Debrecen, Hungary’s second-largest city. CATL is the world’s biggest maker of electric vehicle (EV) batteries. Indeed, it manufactures a third of the world’s EV batteries, according to industry reports.
From the Hungarian government’s perspective, there is an entirely different story, one of “win-win” cooperation with China and a vision of the Belt and Road Initiative (BRI) producing East-West connectivity. Orbán’s fascination with Chinese President Xi Jinping’s flagship project has been known for a while. His participation in the 3rd BRI Forum in October 2023, where he was the only EU leader in attendance, made this even clearer. The propagandistic representation of China’s foreign policy and foreign investments is now part of the output of Hungary’s government-backed media and think tanks, leading to what can be seen as a synergy between Orbán’s “Eastern Opening” strategy and the BRI.
However, behind “win-win” narratives and mutual assurances of friendly ties, the reality of China’s mega-investment projects in Hungary is much more complicated. Economic, environmental, and societal challenges are all part of the picture. The construction of the much-promoted Budapest-Belgrade railway, almost entirely financed by Chinese loans, came to a standstill recently due to various issues with its EU standardization. The plan to open a campus of China’s Fudan University in Hungary was met with public protests in 2021 due to the lack of transparency and high costs.
In July 2023, CATL announced that the area of its planned EV battery factory plant in Debrecen will be 13% smaller than originally planned, down from 277,188 to 240,435 square meters. Nonetheless, locals, NGOs, and academic experts in Hungary remain alarmed. The primary concerns are environmental pollution and health risks, as well as no substantial official study of these issues in Orbán’s increasingly authoritarian political system. A recent study by the Washington-based Federation for Defense of Democracies (FDD) also points to CATL’s close ties to the Chinese Communist Party (CCP), including its major role in China’s global technological expansion strategy, which can create economic dependencies and potential security risks abroad.
A View From the Ground: Multitude of Related Projects, Worried Locals and Mayors
To find out more about CATL’s much-discussed mega-investment project, I traveled to Debrecen. It is the second largest city in Hungary, with around 200,000 inhabitants and is a stronghold of Orbán’s ruling Fidesz party. Despite this, Debrecen’s Fidesz-affiliated mayor, Dr. László Papp, has become increasingly critical of the government’s planned regulations that will purportedly limit the environmental damage potentially caused by the CATL battery plant and other similar projects. According to one of his recent Facebook posts, a legal loophole in the regulations will make it possible for battery-producing firms to sign contracts with a pledge to limit their environmentally damaging activities within a certain time. However, this decreases the chances that such factories can be immediately closed or fined in case they do not meet the current environmental standards. In Papp’s view, this loophole is unacceptable.
The small town of Mikepércs to the south of Debrecen is home to around 5,000 inhabitants and is governed by the Fidesz-affiliated mayor, Zoltán Tímár. The new industrial zone chosen as the site of the CATL plant and other similar investment projects lies between Debrecen and Mikepércs. In a recent interview with the online news site Telex, Tímár expressed his dissatisfaction with the government’s communication with local authorities regarding the various new projects appearing in the vicinity of his town.
As well as concerns about the potentially negative environmental impact of the battery plants, locals are also concerned about the sudden appearance of a large number of migrant workers, as pointed out by Tímár. According to the mayor, almost 50 Asian migrant workers were found living in an average-sized family house in Mikepércs. Plans to build two lodging houses for 225 to 450 migrant workers, located between Debrecen and Mikepércs, were also announced recently This did not please the inhabitants of a small town, according to its mayor, since the locals are not used to large numbers of outsiders. It must be noted that the confusion and dissatisfaction regarding the sudden appearance of large numbers of migrant workers is not surprising in rural Hungary, where for nearly a decade, Orbán’s ruling Fidesz party has made great efforts to spread its anti-migration rhetoric.
To find out more about how the inhabitants of Debrecen perceive the threats posed by the planned battery plants, I met Dr. Zsolt Gondola, a lawyer and president of the Debrecen-based NGO “Civil Fórum”, which has been active in publically opposing the planned projects. He pointed out that the CATL plant is the largest but not the only planned investment project in and around Debrecen. Moreover, he added, the announcement of the €7.3 billion Chinese investment project has attracted a number of other “medium-sized” plants, not all Chinese-owned but often connected to various aspects of car battery production. Some studies have been made on the expected ecological footprint of the CATL plant. According to Gondola, the plant could produce as much as 500,000 metric tons of CO2 emissions per year, around half of what the entire city of Debrecen produces.
In fact, he argued that CO2 emissions could be much higher because of the other factories expected to open to support the CATL plant with various components for its production. Moreover, the aforementioned estimate for the plant’s CO2 emissions does not include other aspects of the expected ecological footprint: the 500,000 vehicles, including 130,000 trucks, that will enter the plant per year; the large amount of hazardous waste that the plant will produce and which will need to be transported regularly; and the potential contamination of groundwater. Based on various surveys, including one carried out by Civil Fórum, between 60 and 80% of Debrecen’s residents oppose the construction of the CATL plant in the city. Gondola also identified a lack of communication and trust between residents and state organs, as well as with the Chinese investor, on the issues related to the battery plant project.
Following the interview with Gondola, I took a taxi to the so-called “Southern Industrial Zone” between Debrecen and Mikepércs to visit the construction site of the CATL plant and other factories around it. The sheer size of the area reserved for the new industrial projects is astonishing. Progress on the construction of these projects varies. The foundations are still being laid for some factories, while others now have a permanent structure. There is clearly a lot of work going on, with large numbers of trucks coming and going, and container buildings are being set up for workers being employed in the construction project. It was possible to drive around most of the construction sites, except for CATL, where the entry road was barred with a “no entry” (for outsiders) sign. Nevertheless, I managed to take some pictures of the construction site from a bit further away. The CATL plant seems to be one of the projects where (at the time of visiting on October 11th 2023) the basic structural pillars of the plant had been set up already (see Photo 1).
Scholarly views in Hungary: concern about environmental impact, skepticism about long-term economic benefits
On October 10th, a position paper was issued by the Presidential Committee for Sustainable Development at the Hungarian Academy of Sciences (MTA) on the issue of EV battery plants. It brought together the opinions of leading scientists with research interests in sustainability and expressed their dissatisfaction about the lack of sufficient consultation with experts and civil society before launching these projects. Apart from pointing out the lack of sufficient investigation into the potential environmental impacts of the investment projects, the paper also criticized the overall reliance on lithium battery technology, which the group of experts believes is not going to remain the leading battery-producing technology in the near future. Furthermore, it is also noted that there is an insufficient number of technicians with suitable skills in Hungary to operate the planned battery plants, for which reason a large number of foreign workers will likely be employed in the plants.
To find out more about the potential economic and societal impact of the planned EV battery plants, I met Dr. Dóra Győrffy, a professor at the Institute of Economics of the Corvinus University of Budapest. Győrffy is an outspoken critic of the Hungarian government’s plans to turn Hungary into an “EV battery great power”. She has given many interviews about the topic and recently published a research paper. According to this 2023 paper, by 2021, Hungary was the 3rd largest producer of battery power after China and the United States. It produced around 28 gigawatt hours (gWh) that year. This was mostly due to already existing EV battery plants owned by South Korean firms Samsung and SK On.
Based on projections by S&P Global (also cited in Győrffy 2023: p. 246), Hungary will be the 5th largest producer of lithium-ion batteries in gWh by 2025 (after China, Germany, the US, and Poland), with an increased capacity of 47 gWh. Meanwhile, the CATL factory is expected to add 100 gWh to Hungary’s lithium-ion battery-producing capacity when it becomes fully operational in 2026. According to Győrffy, Hungary is by far beyond what is reasonable in terms of battery production in comparison to its population size (9.7 million people). While not arguing against battery plant investments in general, Győrffy criticizes the decision of CATL’s planned 100 gWh investment due to the already existing overperformance of Hungary in battery production, as well as the numerous issues about already existing battery factories. Those include documented cases of environmental pollution, dangerous working conditions, noise pollution, and a number of other disturbing factors for local residents living in the vicinity of the battery factories.
As she points out, the relatively low wages in Hungary and interest from Chinese battery makers and German carmakers are among the main motivations for more battery plants in the country. However, from an economic perspective, Győrffy sees little long-term benefits for the Hungarian economy from the CATL plant. Indeed, since a large number of the employees will be foreign guest workers due to signifcant labor shortages in Hungary’s economy, most of their salaries will most likely end up as remittances sent to foreign countries, with little impact on the local economy.
I asked Győrffy who, among Hungary’s decision-making elite, benefits from attracting even more battery plants into Hungary. She said the construction business is the primary benefactor of China’s planned mega-investment, and noted that construction business in Hungary has long had close ties to the ruling Fidesz elite of the country, with several of the country’s main oligarchs having a strong presence in the sector.
A symbolically important figure in this regard is Lőrinc Mészáros, Orbán’s childhood friend. A former gas-fitter, he is now the richest Hungarian, according to the country’s popular “100 Richest Hungarians” list. Mészáros’ meteoric rise from being the owner of a nearly bankrupt gas-fitting company in the 2000s to the top of Hungary’s financial elite since Orbán returned to power in 2010 has been anything but uncontroversial. His close personal relationship with Orbán and the importance of state contracts in his acquisition of wealth are much talked about. Among the many major state contracts Mészáros has won, he got the contract to construct the Hungarian section of the Budapest-Belgrade railway in 2019. As of November 2023, the project is still not finished, and its construction came to a standstill recently. The officially stated date of finalization, after several postponements, is currently 2025.
As reported in a number of Hungarian-language sources, Mészáros’ construction firm is already involved in the publicly financed infrastructural projects that are supposed to upgrade Debrecen’s Southern Industrial Zone for CATL and other plants under construction. According to a report by the weekly magazine Magyar Narancs in August 2022, the Hungarian government will spend 88 billion Hungarian Forints (around €23.25 million) on infrastructural projects in the industrial zone, out of which 16,68 billion Forints (around €4.4 million) will go to one of Mészáros’ construction firms, which is tasked with upgrading the power distribution networks located in the site. According to Győrffy, state organs in Hungary have also been engaged in the creation of a suitable legal environment for the ambitions of foreign battery plant investors and the domestic construction business. For instance, in February 2023, the Ministry of Foreign Affairs and Trade proposed a new legal framework for the legal handling of foreign investment projects of “major economic importance” that will simplify and hasten processes of land acquisition. According toGyőrffy’s paper, if the planned CATL investment is realized, China will become Hungary’s second largest foreign investor after Germany, up from the 10th position in 2020 (see Győrffy 2023: p. 251).
To find out more about the international context and the CATL project’s potential impact on Hungary-China relations, I talked to Dr. Tamás Matura, an assistant professor at the Institute of Global Studies at Corvinus University and a renowned expert on Hungary-China relations. I asked Matura whether he agrees with the statement that the realization of the CATL investment project would be a “game changer” in Hungary’s relations with China, and even in CEE-China relations in the broader sense. Matura said that while in some of his earlier writings he was more skeptical about China being a significant actor in Hungary, the announcement of the €7.3 billion CATL project changes this.
Looking back at the evolution of Chinese investments in Hungary over the past 15 years, Matura argued that, similar to other countries in the CEE region, there was more rhetoric than actual results in terms of China’s economic engagement. Referring to a 2021 report on Chinese FDI in the CEE region, he noted that the total Chinese FDI stock in Hungary was not more than $3 billion in 2021. Furthermore, there was a common pattern of announcing plans for large investment projects but never even starting their construction. This is, however, in stark contrast to the CATL and other Chinese battery plant projects that have been announced recently and are already in the construction stage, as Matura noted and which I can confirm based on my visit to Debrecen.
Matura, however, is skeptical about the long-term economic benefits of the planned investments for the Hungarian economy. In general, he sees Hungary as a laggard behind most other EU members in the CEE region when it comes to innovation and production with high added value. In his view, the CATL project does not hold any promise of moving Hungary away from production with low added value, mostly related to the country’s vast automobile manufacturing industry. Moreover, Matura also shares the view with other experts that it is not guaranteed that the lithium-ion technology used by CATL will be the most advanced technology within battery production in the coming decades. Hence, the demand for lithium-ion car batteries produced by CATL could potentially experience a significant drop.
I asked whether the realization of the CATL investment project will make Hungary significantly more dependent on China economically. Matura noted that the car batteries produced in the planned CATL plant will primarily be sold to German carmakers. Hence, he is skeptical about the view that the project will make Hungary move away from Western economic interconnectivity and lead to a new Chinese-dominated era of Hungary’s economic relations. As such, he agreed, the main question is whether this project is worth the potential environmental damage and other disturbances it will create for locals, given that is questionable how long it will be profitable for the investor to maintain production at the plant.
Conclusions
The Hungarian government’s intention is to attract large-scale Chinese investments into the country. On the one hand, this is clearly related to Orbán’s doubling down on upgrading, instead of de-risking, when it comes to economic relations with China, Russia, and other authoritarian states. The main buyers of car batteries produced in Hungary, on the other hand, will be German carmakers, for which reason they apparently also have an interest in such investments. There are also domestic desires at play, related to the political-economic system Orbán has built during his 13-year reign. This system is based on the influence of a small circle of close partners with decisive influence on the country’s economic affairs and the relevant legislative processes. The construction sector, dominated by Orbán-aligned oligarchs, such as Mészáros, apparently also sees major potential in attracting Chinese mega-investments into the country. The realization of the new battery plant projects is forging ahead and they are expected to be in operation by 2026. Construction sites are busy despite calls for more monitoring and transparency regarding environmental and societal hazards. Yet, the voices of experts, NGOs, and even local politicians from the ruling Fidesz party are sidelined or dismissed as mere “noise-making” by the political opposition.
