Chinese companies even run factory canteens, while Hungarian firms have largely been left with low-value-added activities.
This article is an edited translation of a Hungarian article published by Narancs.hu.
Viktor Orbán set out to turn Hungary into Europe’s battery powerhouse. He attracted the world's largest Chinese and South Korean battery manufacturers with generous state subsidies.
The new government has now discovered that the factories came with an entire Asian supply chain. As a result, the profits, technology and key business relationships have largely remained in foreign hands.
Following Orbán’s defeat in the April elections, Prime Minister Péter Magyar faces a question his predecessor never seriously asked: can an industry that has so far primarily served Chinese interests be transformed into one that also benefits Hungarian companies?
A New Government Inherits the Industry
Responsibility for Hungary’s battery sector has been divided among three ministries. Minister of Economy and Energy István Kapitány oversees industrial policy, mining, energy and investment. Minister of Science and Technology Zoltán Tanács is responsible for research and development, while Environment Minister László Gajdos supervises environmental regulation.
During the election campaign, Magyar’s government promised to review major battery investments. So far, however, it has shown little interest in requiring foreign manufacturers to cooperate more closely with domestic firms through local-content rules or supplier quotas. In any case, the factories already operating are simply too large and too deeply embedded in Hungary’s industrial landscape to be fundamentally challenged.
Hungary built one of Europe’s largest battery manufacturing hubs almost overnight, and battery plants quickly became one of the country's most divisive political issues.
At the same time, batteries remain a cornerstone of the green transition and may prove essential for preserving Europe’s automotive industry. That was precisely the vision pursued by Orbán’s last two governments.
Former Technology Minister László Palkovics openly declared his ambition to make Hungary Europe’s second-largest battery producer after Germany. The task of attracting Chinese and South Korean investors was entrusted to former Foreign Minister Péter Szijjártó, a politician known for his close ties to Moscow.
Rather than relying on market forces, the government pursued its familiar strategy. Through generous tax incentives and infrastructure investments, it attracted Samsung, LG, SK On and China's CATL.
Just three major battery plants received HUF 138.6 billion (around €350 million) in state support. For Asian investors, Hungary became an attractive gateway to the European market backed by enthusiastic political support. Much less attention was paid to whether the country actually possessed the resources needed to sustain such rapid expansion.
This exposed the central weakness of Hungary’s strategy. Foreign manufacturers barely integrated into the domestic economy, instead bringing their own suppliers, technologies and management structures.
This is especially evident among Chinese investors—including CATL, EVE Power, BYD, Huayou Cobalt, Semcorp and KunlunChem—which together have established an almost entirely Chinese-controlled battery value chain on Hungarian soil. Hungarian firms have largely been confined to low-value-added activities. One industry expert interviewed by Narancs.hu remarked with surprise that even factory canteens were often operated by Chinese contractors.
The expansion has also brought significant social and environmental costs: complaints about groundwater pollution and noise in Göd, allegations that cases involving migrant workers exposed to carcinogenic substances were concealed, ongoing protests against CATL's factory in Debrecen since 2023, and growing economic uncertainty as slowing global demand for electric vehicles has forced battery manufacturers to cut jobs.
Hungary also lacks almost all critical raw materials required for battery production, faces shortages of skilled labour, and must cope with limited water resources on the Great Hungarian Plain, where several battery plants have been built.
Searching for Critical Raw Materials
Critics often compare Hungary’s battery strategy to the grand industrial ambitions of the communist era, when planners attempted to grow bananas, oranges and lemons in a climate clearly unsuited to them.
The analogy is imperfect but captures an important reality. Hungary possesses very few known deposits of the raw materials needed for battery production.
Recognising this limitation, the previous government launched the National Exploration Programme (Nemzeti Feltárási Program), scheduled to run until 2030. The programme is not intended to open new mines directly. Instead, it aims to identify potential deposits, reduce geological uncertainty and make future mining projects more attractive to private investors.
The state would finance geological surveys and exploration, while commercial extraction would be left to the private sector.
Whether the programme survives under the new government remains uncertain. Government sources suggest that people close to Orbán—including his father, who has longstanding interests in the mining sector—were among its main beneficiaries.
While European debates on critical raw materials largely focus on lithium, Hungary's geological ambitions extend much further. The country is exploring deposits important for manufacturing, electronics, defence and electricity infrastructure.
In a recent interview, Bence Gonda, Strategic Vice-President of the Hungarian Regulatory Authority, highlighted the strategic importance of the Recsk deposit in northern Hungary. According to him, it is "an exceptional deposit even by European standards," containing significant reserves of copper alongside substantial quantities of zinc, lead, silver, molybdenum and rhenium.
Experts argue that modern exploration could uncover resources overlooked by previous generations. Until the 1990s, geological surveys focused on roughly 20 economically important elements. Today that number has more than doubled, while exploration technologies have advanced significantly. Whereas earlier surveys typically examined deposits a few hundred metres underground, modern exploration increasingly targets depths of 1,500 to 2,000 metres.
Hungary’s broader strategy is framed by the EU Critical Raw Materials Act, adopted in 2024, which aims to accelerate strategic mining projects. The EU wants at least 10 percent of its critical raw materials consumption to come from domestic production and 15 percent from recycling.
Hungary’s exploration programme aligns with these objectives. After 18 months of preparation, the government established the National Critical Raw Materials Roundtable, bringing together ministries, state-owned mining companies, universities and industry organisations.
The materials under consideration go well beyond battery production. Gallium is crucial for semiconductors, while aluminium and arsenic play important roles in defence technologies and advanced manufacturing. Securing access to these resources could significantly shape Hungary’s future position across several strategic industries.
State-owned companies are expected to play a leading role. In particular, Nitrokémia and Mecsekérc will likely spearhead geological exploration, while private companies would participate in commercial extraction, processing and downstream industrial projects.
Lessons from the Orbán Era
Whether Hungary ultimately secures critical raw materials through domestic mining or imports, the experience of the past decade offers one clear lesson.
Industrial policy cannot be judged solely by the number of factories it attracts.
To fully benefit from European initiatives such as RESourceEU and the Raw Materials Mechanism, foreign manufacturers will need to integrate much more deeply into Hungary’s domestic economy. That means building genuine partnerships with Hungarian suppliers, research institutions and technology companies.
Joint European procurement mechanisms may strengthen supply security, but they will generate lasting economic value for Hungary only if domestic firms become part of the strategic segments of the value chain. Otherwise, they will simply reinforce the position of foreign-owned factories already operating in the country.
The central question for Hungary over the next decade is therefore not whether its battery industry will survive—it almost certainly will.
The real challenge is whether a less centralised and less politically driven industrial policy can finally create strong domestic companies capable of integrating into—and benefiting from—the industrial ecosystem inherited from the Orbán era.
