Korean battery firms in Hungary see favorable shifts in business landscape

Samsung SDI's battery factory in God, Hungary, March 3 / AFP-Yonhap

Korean battery firms running manufacturing facilities in Hungary are expected to ease concerns about their businesses despite the European country’s first political turnover in 16 years, as incoming Prime Minister Peter Magyar and environmentalists have signaled their intent to improve relations with the industry they once criticized.

Cautious optimism is also growing that the winning Tisza party’s pro-European Union stance will help revitalize Hungary’s economy and increase local demand for batteries.

On April 13, a day after his party won the parliamentary election, Magyar told reporters that his government “warmly welcomes investors,” referring to Chinese battery investment projects in Hungary.

“We want to position Hungarian companies as partners of BYD, CATL and other major investors, and I believe we will be able to cooperate,” he said.

During his election campaign, Magyar expressed a hostile stance toward Asian battery firms, repeatedly turning the industry into a political issue by raising environmental and labor concerns. He also said his administration would review Chinese investment projects, triggering concerns among Korean battery firms operating in his country.

However, the new prime minister said that the review is not intended to halt investments but to ensure that they contribute to the Hungarian economy and comply with EU and Hungarian standards on environmental protection, health and labor.

While Magyar continues to stress environmental concerns, he has also emphasized the need for local Hungarian companies to participate as equal partners with battery firms in creating value, which is seen as an olive branch to the industry.

Peter Magyar, leader of Hungary's Tisza party, answers journalists' questions during a press conference in Budapest, Hungary, Monday. AFP-Yonhap

On April 16, Greenpeace’s Hungarian branch announced that it had found no significant pollution in the vicinity of battery factories run by three Korean companies — Samsung SDI, SK On and Dongwha Electrolyte — after analyzing 10 samples taken from shallow wells near the facilities last month.

“None of the samples were found to contain any contamination that exceeded the limit value or was significant from a health perspective,” the environmental group said. “We do not conduct political measurements, and we do not want to manipulate our results.”

Before the election, Magyar’s party and environmentalists had alleged that battery plants were discharging toxic pollutants, despite the Viktor Orban government’s denials.

As a result, concerns had grown that the Tisza party’s victory could tighten Hungary’s environmental regulations and delay approvals and other administrative procedures involving battery plants.

Industry officials also feared potential reductions in subsidies and tax incentives.

“The Fidesz administration designated the battery and automotive industries as strategic sectors and attracted large-scale investments in them," the Korea Trade-Investment Promotion Agency’s Budapest office said in a report last December. "If the Tisza party seizes power, it is likely to tighten regulations on these industries, citing environmental and social problems.”

Jipyong, a Korean law firm with an office in Hungary, saw that the country’s political turnover could be a blessing in disguise for Korean battery firms despite the possibility of short-term setbacks in approval procedures and capacity expansions.

“In the medium to long term, there will likely be opportunities such as the revitalization of the Hungarian economy driven by the unfreezing of EU funds and rising demand for electric vehicles and energy storage systems as a result of an accelerated shift away from Russian energy sources,” the law firm said in an April 15 report.

Amid this favorable shift, Samsung SDI said that its existing plant in Hungary is likely to supply batteries for Mercedes-Benz, denying speculation that the Korean firm may build its new European factory dedicated to the German carmaker in Austria, Slovakia or the Czech Republic.