According to a report by Financial Times, the European Commission (EC) is investigating whether China provided unfair subsidies for a BYD electric vehicle (EV) plant in Hungary. In December last year, the Chinese automaker announced that it would open its first European EV plant in Szeged.
BYD is expected to invest as much as four billion euros (about RM19 billion) in the southern Hungarian region and create as many as 10,000 jobs. European Union (EU) officials say the factory, which is expected to begin operations this October, was built with Chinese labour and uses mainly imported parts, which creates little economic value for the bloc.
Should the EC find that BYD has benefitted from unfair state aid, it could force it to sell some assets, reduce capacity, repay the subsidy and potentially pay a fine for non-compliance. “It is not surprising — and it is generally known that any investment that takes place in Hungary appears on the commission’s radar very quickly, and the commission follows with redoubled attention every state aid decision that takes place in Hungary,” said Janos Boka, Hungary’s Europe minister.
The EC implemented the Foreign Subsidies Regulation (FSR) in 2023 to ensure a level playing field for all companies. It led to a trade investigation last year that saw the commission levying tariffs on EVs made in China. Establishing production sites in Europe is a way to circumvent these tariffs.
“In recent years, foreign subsidies appear to have distorted the EU’s internal market, including by providing their recipients with an unfair advantage to acquire companies or obtain public procurement contracts in the EU to the detriment of fair competition,” the commission wrote on its official website.
In addition to Hungary, BYD agreed in July 2024 to invest in a new EV plant located in Turkey which is expected to start production sometime in 2026. Earlier this week, Reuters reports that the Chinese company will announce its third European production site in the next seven to eight months.
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