The European Commission has opened a preliminary investigation into whether Chinese electric vehicle (EV) giant BYD received unfair government subsidies for its planned factory in Hungary—highlighting rising trade and political tensions between Brussels and Beijing.
Brussels probes Chinese EV subsidies and local economic impact
The probe, reported by The Financial Times and The Wall Street Journal, could lead to sweeping penalties—potentially forcing BYD to sell assets, reduce capacity, repay subsidies, or pay fines if found in violation.
BYD's EUR4 billion (approx. US$4.3 billion) investment in Szeged, southern Hungary, is projected to generate up to 10,000 jobs. However, EU officials say the facility is being built by Chinese workers and depends heavily on imported parts—particularly batteries—contributing little to local supply chains or technology transfer.
Hungarian EU Affairs Minister János Bóka said Budapest had not been notified in advance but called the move "unsurprising" given Brussels' heightened scrutiny of all state aid in Hungary. He emphasized that the government has rigorously reviewed its subsidy programs and remains composed amid the probe.
EU targets deepening China-Hungary ties with foreign subsidy enforcement
According to Radio France Internationale (RFI) and Liberty Times Net (LTN), the investigation is seen as a response to growing economic ties between China and Hungarian Prime Minister Viktor Orbán, who has repeatedly clashed with Brussels—particularly over the Ukraine war. Orbán hosted President Xi Jinping in Budapest last year and has drawn more than a quarter of all Chinese investment into the EU.
The EU's Foreign Subsidies Regulation, introduced in July 2023, allows the Commission to investigate and penalize companies benefiting from financial support by non-EU governments—including grants, tax incentives, cheap loans, R&D funding, and public contracts.
The Commission has invoked the rule multiple times to investigate Chinese firms. While it has not yet commented on the BYD case, it previously imposed a 17% provisional tariff on BYD's imported EVs following a separate anti-subsidy probe.
Sabine Weyand, Directorate-General for Trade at the European Commission, has reinforced the EU's position, stating the bloc is "not interested in low-value-added, no-tech-transfer assembly operations," and foreign firms must comply with EU competition laws.
Hungarian Prime Minister Viktor Orbán. Credit: AFP
BYD accelerates global EV push but runs into regulatory barriers
Backed by Warren Buffett and vying with Tesla in global EV markets, BYD is aggressively expanding overseas. Beyond Hungary, it plans a new plant in Turkey and is scouting a third European location. In late 2023, the company raised over US$5 billion via a Hong Kong share sale to fund its growth strategy.
Yet BYD is facing pushback in China. Reports indicate Beijing has delayed approval for the company's proposed plant in Mexico, citing concerns that its intelligent vehicle technologies could be transferred to the US.
Other Chinese automakers are also expanding in Europe. Chery has invested in Spain, Geely is in talks with Poland over a new facility, and battery giant CATL is constructing Europe's largest battery plant in eastern Hungary with over EUR7 billion in funding.
EU scrutiny of Chinese EV investments is emerging as a key policy battleground in 2024, as the bloc aims to balance foreign capital access with safeguarding its industrial ecosystem and technological edge.
Article edited by Jack Wu
