Production of Hungarian car manufacturers reached $ 30 billion in 2017, or 21% of the country's GDP

today, 00:05 am

Author:

Catalina Apostoiu

BMW's decision to build a billion-euro factory in Debrecen, Hungary, will decisively increase the weight of the automotive sector in the neighboring economy

BMW has built its first plant in Europe in recent years two decades, cemiting its position near the local market, as the cost of automobile transportation increases globally amid intensifying protectionism, Bloomberg writes. Hungary will host the three largest German automakers – BMW, VW and Daimler.

BMW will invest 1 billion euros in a new production site in Hungary that will produce 150,000 cars a year. This will be the first new production unit in the region since 2000, when the company built a plant in Germany.

Like other automakers, BMW insists on adapting to changing global trade policies. Depending on the type of vehicles that it will produce, the Hungarian factory could offset the increasing risks. SUV production in Europe would help BMW to protect against the growing trade tensions affecting its US plant. This could also help the company counteract the mini-sourcing disturbances produced in Oxford, England, towards the EU after Brexit.

"This seems to be a decision motivated by reasons of risk minimization and cost optimization," said Juergen Pieper, an analyst at Bankhaus Metzler. "Western Europe is too expensive, Mexico and the United Kingdom are priced, and the US factory is already huge."

BMW declined to say which models it will produce in the new factory, but said that it did not intend to manufacture mini-cars in Hungary. The company chose Hungary as the location for the new plant, although European sales of the BMW and Mini models grew by only 1.2% in the first half of this year, below the growth registered on the other markets

. Debrecen, near Budapest, will begin in the second half of 2019. By choosing Hungary as the site of its latest production site, which will add to the 31 production and assembly facilities worldwide, the German carmaker luxury will become the fifth largest automaker to launch a production unit in the country. Daimler, the Audi brand of Volkswagen, the French PSA group and Suzuki Motor already have similar units in Hungary.

The production of car manufacturers reached last year a value of 8.08 billion forints (29.45 billion dollars), about 21% of GDP in Hungary, reveal official data.

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