EU Investigates BYD Factory in Hungary

According to a report from the Financial Times on Thursday, the European Union is investigating whether the Chinese government has provided unfair subsidies to BYD’s electric car factory in Hungary. The report cited sources as saying that the European Commission has initiated a preliminary investigation into the factory’s alleged acceptance of foreign subsidies.

If Brussels finds that BYD has benefited from unfair government subsidies, it may require the company to sell off some assets, reduce production capacity, repay subsidies, or even face fines for non-compliance.

Hungarian Minister for European Affairs János Bóka told the Financial Times that they have not yet received notification from the EU about the investigation. He emphasized that the government maintains strict scrutiny over state subsidies and intends to remain calm regarding the matter.

BYD’s investment in the Szeged region of southern Hungary is expected to reach 4 billion euros and create up to 10,000 job opportunities.

However, EU officials have pointed out that the factory is primarily constructed by Chinese labor and uses mostly imported components, including batteries, which provide limited economic value to the EU.

A spokesperson for the European Commission declined to comment, while a spokesperson for BYD has not responded to requests for comments.

Under the Foreign Subsidies Regulation that came into effect in 2023, the EU has initiated similar investigations into some Chinese companies. If it is found that companies have received direct or indirect subsidies from non-EU governments, such as grants, interest-free or low-interest loans, tax incentives, government-funded research and development, or government contracts, the EU can impose a wide range of remedial measures on the companies.

In previous trade investigations, the EU has determined that BYD and other Chinese automakers received subsidies, leading to tariffs being imposed on imported vehicles from China.

Sabine Weyand, the Director-General of Trade at the European Commission, stated last month that Chinese companies must comply with European rules to ensure a “fair competitive environment.”

“We do not want mere assembly plants without added value or technology transfer,” Weyand said, emphasizing that the EU has mechanisms in place to ensure this.

Previous EU trade investigations found that BYD had received subsidies and imposed a 17% tariff on its imports.