The European Commission has launched a probe into whether Chinese electric vehicle maker BYD received unfair subsidies for its plant in Hungary, a move that could escalate trade tensions between the EU and Beijing. This investigation comes amid Hungary’s increasing economic ties with China under Prime Minister Viktor Orbán, who has successfully attracted large Chinese investments to his country, including the BYD plant in Szeged, expected to be worth €4 billion and create up to 10,000 jobs.
According to sources familiar with the matter, the Commission is in the early stages of a foreign subsidy investigation, which could lead to serious consequences for BYD if it is found to have benefitted from state aid that violates EU rules. The Financial Times (FT) reports that, if the Commission determines that the Chinese automaker received unfair subsidies, BYD could be forced to sell assets, reduce its plant capacity, repay the subsidy, and potentially face financial penalties.
The Hungarian government, led by Orbán, has long had strained relations with Brussels, particularly over its stance on Russia and the war in Ukraine. Orbán, who has welcomed significant Chinese investment into Hungary, including BYD’s plant, has been accused of undermining EU cohesion. Hungary’s Europe minister, János Bóka, told the FT that Budapest was aware of the probe but remained unphased, emphasizing that the country scrutinizes state aid carefully.
The probe is particularly sensitive, as it highlights concerns about the growing economic influence of Chinese companies in Europe. EU officials have pointed out that the BYD factory in Hungary uses mainly imported Chinese labor and parts, creating minimal economic value for the EU. Additionally, concerns have been raised about the transparency of such investments, especially given the foreign subsidies that might distort competition within the EU’s internal market.
This investigation follows earlier actions under the EU’s Foreign Subsidies Regulation, which was introduced in 2023 to address foreign state aid. The regulation targets non-EU government contributions to businesses, including subsidies, loans, and government contracts, with remedies ranging from asset sales to tariff impositions. Notably, BYD was already subject to tariffs last year after a trade investigation revealed that it, along with other Chinese carmakers, received unfair subsidies. The EU has stressed the need for Chinese companies to adhere to European standards, ensuring fair competition and preventing what it sees as simple assembly operations without significant technological or economic contributions.
As the investigation unfolds, BYD’s expansion plans in Europe could be impacted. The company is also eyeing a new plant in Turkey and is navigating regulatory hurdles in China, where concerns have arisen over its technology potentially leaking to the US. Other Chinese EV manufacturers, such as Chery and Geely, are also looking to invest in Europe, with significant interest in countries like Spain and Poland. The EU remains cautious about such investments, ensuring they align with its broader goals of technological innovation and fair economic practices within the bloc.
