BMW's decision to build a € 1bn factory in Debrecen, Hungary, will decisively increase the weight of the automotive sector in the neighboring economy
BMW produces its first factory in Europe in the last few years two decades, cemiting its position near the local market, as the cost of car transport is rising globally amid the intensification of protectionism, Bloomberg writes. Hungary will become host to all three major German carmakers – BMW, VW and Daimler.
BMW will invest 1 billion euros in a new production facility in Hungary that will produce 150,000 cars annually. This will be the first new production unit in the region since 2000 when the company built a factory in Germany.
Similar to other car manufacturers, BMW is pressing for adjusting to changing global trade policies. Depending on the type of vehicles it will produce, the Hungarian factory could offset rising risks. Production of SUVs in Europe would help BMW protect itself against the growing trade strains affecting its US factory. It could also help the company counteract mini-supply disruptions produced in Oxford, England, to the EU after Brexit.
"It seems to be a decision driven by risk minimization and cost optimization reasons," said Juergen Pieper, an analyst at Bankhaus Metzler. "Western Europe is too expensive, Mexico and the UK are prone to pricing, and the US factory is already huge."
BMW declined to say what models it will produce in the new factory, but said it did not intend to manufactures Mini cars in Hungary. The company chose Hungary as the location for the new factory, although European sales of BMW and Mini models advanced only by 1.2% in the first half of this year, below the growth recorded in other markets
Factory building works close to Debrecen, near Budapest, will start in the second half of 2019. By choosing Hungary as the location of its last production facility, which will add to the 31 production and assembly facilities worldwide, the German luxury car manufacturer 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 the Suzuki Motor already have similar units in Hungary.
The production of car manufacturers reached a value of 8.08 billion forints ($ 29.45 billion) last year, or about 21% of GDP in Hungary, official data reveal.
Article published in the printed edition of Ziarul Financiar dated 01.08.2018