Analysis-Hungary PM orban's battery bet turns into election headache

Hungary’s EV Battery Gamble Becomes Orban’s Election Challenge

The Rise and Risks of Hungary’s EV Battery Industry

By Gergely Szakacs and Krisztina Fenyo

Orban’s Strategic Bet on EV Batteries

GOD, Hungary, March 5 (Reuters) - Hungarian Prime Minister Viktor Orban's bet on a battery-driven economic upswing appears to have backfired, with the sector mired in a prolonged downturn and environmental concerns coming to the fore shortly before a make-or-break national election.

In power for 16 years, Orban has bet big since 2021 on EV batteries, attracting foreign investment worth some 26 billion euros, based on a government tally, mainly from South Korean and Chinese manufacturers, and making Hungary a key hub in Europe.

But with Orban, a eurosceptic nationalist, already trailing his centre-right challenger Peter Magyar, according to most opinion polls, surveys show Hungary's battery plants have become an electoral risk ahead of the April 12 ballot.

Although battery demand is seen rising in the years ahead, the sector has proved unable so far to revive Hungary's stagnant economy.

Environmental and Safety Concerns

Orban's government has also been on the defensive since news website Telex published a report last month on the scale of health and safety violations at Samsung SDI's battery plant in the northern town of God.

Orban aide Gergely Gulyas said Samsung had been fined several times between 2022 and 2023 for exceeding emissions standards in the factory, although the government says there was no pollution outside the plant.

However, last Friday police said they had launched four criminal procedures against Samsung since 2023, including a 2024 probe into environmental damage and occupational endangerment, and a 2026 inquiry into waste management violations.

'WE USED TO HAVE FARMLANDS'

Samsung said last month its Hungarian factory, which temporarily had its environmental licence suspended, strictly complied with environmental and safety regulations. Its press office did not respond to Reuters' questions.

"We will continue to consider the safety and health of our employees as our most important value in the future and continue to conduct responsible corporate activities based on trust with the local community," it said on its website.

Laszlo Toth, however, who rents a house near the factory, said he was concerned by what he described as large plumes of steam rising from the plant every night. 

"These battery plants were not supposed to be located next to human settlements but in deserts," said Toth, 50, who works as a food courier.

"We did not need them. We used to have farmlands."

Economic Impact and Stagnation

From Superpower Ambitions to Stagnation

When Orban won the 2022 election, he set out plans to turn Hungary into a battery "superpower" by luring Asian investors and making it the world's fifth-largest exporter of batteries.

But that was followed by a three-year stretch of stagnation, including two years of falling battery output. Saddled with the EU's worst inflationary surge after Russia's 2022 invasion of neighbouring Ukraine, Hungary's economy has lagged even a weak EU growth average that Orban had sought to eclipse.

GROWTH HOPES DRIFT OUT OF REACH

Orban's hopes of lifting growth towards 6% beyond 2026 now look out of reach. The International Monetary Fund projects annual expansion of 2% to 2.6% until 2030.

His government has backed the EV sector with subsidies worth some 1.3 billion euros ($1.51 billion), including up to 344 million euros for Samsung's capacity expansion last year.

Political Fallout and Public Perception

David Karas, senior researcher at CEU Democracy Institute, said the perception that Orban's nationalist government was prioritising foreign capital over local interests was politically toxic.

"Rather than serving as an economic and geopolitical buffer for the regime, the battery bet is now eroding the social contract that underpinned Orban's system," he said.

Orban's bet could still pay long-term dividends, with the International Energy Agency projecting EV battery demand more than tripling by 2030 from 2024 levels.

But a Median survey released last week showed nearly two-thirds of those polled believed the Samsung plant's difficulties had harmed Orban's re-election prospects.

Election Implications and Public Sentiment

Opposition Response and Voter Concerns

Opposition leader Magyar has pledged to tighten oversight of battery plants and curb subsidies for gigafactories if his Tisza Party unseats Orban's Fidesz.

God resident Istvan Takacs, 64, said he had still not decided how to vote but expressed concern about the rising cost of living.

"When I started working, I could buy three loaves of bread from an hourly wage," said Takacs, who drove tractors for four decades.

"Now, we haven't got much further, though we're not worse off either," he said. "I think everything's stagnating here."

($1 = 0.8610 euros)

(Writing by Gergely SzakacsEditing by Gareth Jones)