When Péter Magyar was campaigning in Hungrary’s industrial cities, before the elections that would land him the Prime Minister job, the country’s Chinese electric vehicle (EV) and battery plants stopped being just an investment story. A worker was killed during the construction of BYD’s EV plant in Szeged, NGO China Labor Watch launched forced labour investigations, police probed toxic emissions at levels that shocked regulators, and the government was accused of covering it all up.

Under Magyar’s predecessor, Viktor Orbán, Hungary abolished its environment ministry, centralised investment permit decisions to the prime minister’s office, and waved through projects that would have faced years of regulatory scrutiny elsewhere.

The twin pillars of that strategy, which Magyar inherits, are BYD’s electric vehicle plant in Szeged, south Hungary, and CATL’s battery gigafactory in Debrecen, east Hungary, which supplies BMW and Mercedes-Benz.

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Magyar won Hungary’s April election in part on a promise to change all of this. However, two months on, the EU is moving to curb China’s commercial practices faster than he may have anticipated, and the investments he inherited may not survive the collision.

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The EU is preparing its most serious collective action ever against Chinese trade practices. Beijing signaled its displeasure by cancelling two planned EU diplomatic meetings this month.

On the day after his election victory, Magyar adopted a cautious tone, praising China as “one of the most important, largest, and strongest countries in the world” while pledging to review Chinese investments, but “not with the aim of shutting them down”. He called on BYD [and] CATL, to follow Hungarian environmental and labour regulations, adding that he wanted to “position Hungarian companies as partners” at their plants.

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Discussions in Brussels increasingly encompass new tariffs, investment screening, supply-chain diversification measures and sanctions enforcement against companies supporting Russia’s war in Ukraine. Beijing has warned it will “take all measures necessary” against EU trade defences and has already imposed five-year retaliatory tariffs on EU dairy imports.

There is also the matter of an EC probe, initiated in March 2025 under the EU’s Foreign Subsidies Regulation (FSR), into whether BYD’s Szeged plant benefited from unfair Chinese state support. Unlike traditional import tariffs that hit goods at the border, the FSR scrutinises state aid already operating within the single market.

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The downside of Chinese investments

While Orbán enjoyed impressive headlines of multi-billion-dollar investment announcements, Hungary was getting the less glamorous end of the deal. The production equipment for BYD’s Szeged facility came directly from China. None of the core technology, the battery chemistry, the intellectual property, is licensed to Hungarian partners.

Chinese EV investment follows a consistent pattern: equipment imports first, local assembly labour second, high-value manufacturing remaining at home. Beijing restricts exports of lithium iron phosphate cathode technology, the electrochemical core of most EV batteries, specifically to prevent host countries from developing competing capabilities.

What Hungary tangibly received is assembly jobs, some regional wage uplift in Debrecen and Szeged, and tax revenue from facilities it neither controls nor could replicate. BYD and CATL are world-leading manufacturers whose dominance rests on scale, vertical integration and decades of accumulated expertise, not primarily on subsidies. Hungary’s dependency will not dissolve if EU measures cut Chinese state support. What Orbán presented as Hungary’s reindustrialisation was, in practice, a position at the bottom of another country’s value chain. Sabine Weyand, the EC’s director-general for trade, has underlined Brussels is “not interested in low-value-added, no-tech-transfer assembly operations.”

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The labour picture reinforces this. By early 2025, the Philippine Department of Migrant Workers estimated around 9,000 to 10,000 Filipinos had travelled to Hungary for employment in the preceding two years, many in the vehicle manufacturing sector at BYD and CATL’s plants. It was the Orbán government that both invited the factories and issued the work permits to staff them.

Since Magyar’s election win, BYD has required its Hungarian contractors to sign an overseas employment compliance declaration, pledging adherence to local wage, working hours and visa rules. Hungarian authorities have gone further still. In May, Hungarian Environment Minister László Gajdos publicly declared that BYD had “seriously violated” its environmental permit obligations; police opened a criminal investigation after contaminated soil from the construction site, containing above-limit waste compounds was detected. Three companies associated with the plant have since been sanctioned and one fined. The informal arrangements of the Orbán era are not just under pressure; they are being actively dismantled.

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Magyar’s approach is better understood as tactical continuity than ideological reversal. He is aligning with Brussels on the issues that unlock EU funds and restore Hungary’s diplomatic standing, while maintaining operational stability for the Chinese plants that underpin his industrial economy. Blocking CATL’s expansion while leaving existing operations untouched, banning agency-recruited workers while exempting those at the Chinese plants: these are the moves of a government trying to satisfy two audiences simultaneously. The ground under his feet is shifting faster than that calculation can hold.

Orbán’s wager was that Hungary could bind itself to China’s industrial rise without ever being forced to choose between Beijing and Brussels. Xi called it an all-weather relationship. The forecast has changed.

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