German premium automotive manufacturer, Mercedes-Benz will expand its car production in Kecskemét, Hungary. Production and Supply Chain Director, Markus Schäfer announced that a second car plant will be build next to the existing factory.
The investment project, which is going to be the largest greenfield investment ever made in Hungary, will cost about EUR1bn and the construction works are expected to be concluded by the end of the decade. In 2016, this is already the 7th Hungarian automotive industry investment project to be announced.
The second factory in Kecskemét will produce about 150,000 cars a year and the investment will create 2,500 new jobs. Mercedes-Benz Manufacturing Hungary Ltd. currently employs approx. 4,000 people and the existing plant has manufactured over 0.5 million compact cars since 2012. The company achieved revenues of EUR3.4bn last year, more than 20 per cent higher as in 2014 and realized after-tax profits of EUR65.8mn in 2015. Moreover, some 0.2 per cent of the GDP and 3.2 per cent of the total export of Hungary are also produced by the Hungarian subsidiary of Mercedes-Benz. Once the new investment will be completed, these indicators could increase to 0.4 per cent and 6.2 per cent, respectively.
Considering its strategic importance for the national economy, the Hungarian government will be also providing funding of HUF12.9bn (EUR41.2mn) for the megaproject. Furthermore, the project has been considerably supported by the Hungarian Investment Promotion Agency (HIPA) as the extensive expansion of car production capacity may further strengthen the role of the Kecskemét in the global manufacturing chain of next generation premium compact models. Hungarian Minister for Foreign Affairs and Trade Péter Szijjártó highlighted that both the government and the municipality are committed themselves to launch development projects (especially road, railway and airport developments) in order to make town Kecskemét more attractive production and service location for the existing and potential investors.
The brand new plant will also apply innovative technologies and procedures, like flexible manufacturing system (‘Flex-Werk’) that allows Mercedes-Benz to be able to promptly react to market demands. With help of using state-of-the-art surface treatment and assembly lines, the new factory will be ready to produce alternative fuel vehicles, different series and type of Mercedes models. Mr. Schäfer told that Mercedes-Benz intends to be one of the top runners in the most important automotive industry trends such as autonomic driving, electro mobility and connectivity (so-called ’Industry 4.0’). The German company will be introducing 8-10 new models to the market within the next year.
Indeed, car manufacturing is a dynamic flagship sector which is undoubtedly the main engine of the industrial production and export of Hungary. Last year more than 525,000 cars were manufactured by the three car producers (Suzuki, Audi, Mercedes) presented in the country. About 93 per cent of the sectoral output is deliverd mainly to the internal market of the European Union (87 per cent), and car industry alone provided more than 20 per cent of the total export in 2015. However, the sector itself is highly concentrated; less than 80 large companies, each employing more than 250 people, are responsible for the 93 per cent of the production and 96 per cent of export as regards to the automotive industry. Based on data available for the period of January and May 2016, the production of the Hungarian car industry increased by some 5 per cent. Alone this sector is now responsible for more than 30 per cent of manufacturing output and it provides jobs for about 157,000 people, 13 per cent more than at the end of year 2015.