Hungary’s automotive sector is in overdrive following a raft of investment announcements by major international names. Debrecen, the country’s second largest city, is reaping the rewards of a strategy to accelerate urban development and increase its population from the current 205,000 to 250,000 by 2030.
Among the roll call of projects to have hit the headlines recently are FAG Schaeffler’s investment in a factory being built in 2018 that will provide 400 new jobs; a €35m investment in the city by Thyssenkrupp; Continental’s €100m funding for a production plant that will employ 450 people; and the arrival of BMW, which will create 1000 new jobs in conventional and electric vehicle manufacturing.
Low tax, high grants
Manufacturers report that they have been enticed to invest in Debrecen because of reasonable labour costs, good infrastructure, appropriate workforce expertise and favourable economic conditions. Debrecen mayor Laszlo Papp says investors benefit from corporation tax of 9% and a flat income tax rate of 15%. He adds: “In Hungary, it is possible to establish a new company within seven days. Additionally, Debrecen, as a regional centre for the Northern Great Plain, benefits from a 50% regional support grant, so it can provide financial support to incoming companies.”
Peter Szabo, managing director of the Debrecen plant at bearings manufacturer Schaeffler, says it first invested in the city almost 20 years ago because there was already an established bearings industry there.
“Since the initial investment a lot has changed, but the important factors for ongoing investment have been the local infrastructure [direct motorway connection to Germany, an airport and a good rail network], the city’s economy and its development of education,” he adds. “The cost structure and the competitiveness of our factory has also contributed greatly. The city’s and the country’s economy and culture have developed a lot and we are much more attractive to the people living here and to those who move here.”
According to Sandra Schillmöller, spokesperson for the BMW Group, Debrecen is ideal for the expansion of its global production network. “It was chosen primarily for its very good infrastructure, suitable logistics connections and proximity to the established supplier network. The availability of qualified personnel locally was another key advantage.”
Zoltán Hornyacsek, head of country communications, Continental Group Hungary, agrees, saying the company’s decision to expand its automotive electronics production footprint “reflects the trust and positive feedback about the performance of the existing Continental organisation in Hungary. The Hungarian government, and the local municipality, provided excellent support to prepare the investment.”
Education and expats
An English-speaking international school is being built in the city to meet the growing demand for international Baccalaureate education for the children of expat workers.
Debrecen has also embarked on an education development programme that aims to boost the number of students in the city by 30% by the mid-2020s. “The Debrecen Vocational Training Centre has increased the number of students by more than 20% in the past three years,” says Mr Papp. “The faculty of engineering of the University of Debrecen is undergoing a significant transformation, and one important result of this is that mechanical engineer Ferenc Anisits, who has led BMW’s Diesel Engine Development Centre for about two decades, has been made an honorary university. teacher.”
Automotive firms in the city say they enjoy good relations with the University of Debrecen, which is expected to play a strategic role in professional training and the development of innovative solutions to support the new manufacturing plants that are opening locally.