Hungary’s post-Orban shakeout ripples through auto industry

Hungary’s effort to purge itself of all things Viktor Orban is now reverberating through the global auto industry.

Under its former leader, the country positioned itself as a European hub in the battery supply chain, courting companies from China and South Korea that went on to set up plants making components for electric vehicles. But concern about the environmental impact became a political battleground and production at some facilities has been halted under new Prime Minister Peter Magyar.

Semcorp’s separator factory in Debrecen in eastern Hungary is entering its fifth month of shutdown after tests showed toxins in nearby soil. The Chinese company makes 40% of the world’s membranes, the thin layers that keep the positive and negative poles of a battery apart.

The plant has taken on an outsize importance because of U.S. regulations banning the import of battery components from China, and it’s not getting any special treatment in the new Hungary.

Under Orban’s leadership, Hungary attracted more than $20 billion of declared investment in battery plants in less than 10 years, but critics said the government looked the other way when it came to the enforcement of environmental standards.

Opposition to the industry played a big role in Magyar’s election win in April as he promised to investigate the environmental consequences along with other hallmarks of the Orban era such as allegations of corruption and cronyism and cozy ties with Moscow.

Often campaigning outside battery plants, Magyar accused Orban of turning a blind eye to alleged cases of pollution, pledging to impose strict standards if elected. Since his landslide win, authorities have made good on that promise.

A supporter holds a sign reading “No Orban, No Battery, No Deal” at a Tisza Party campaign event near the CATL battery plant in Debrecen, Hungary, in July 2025. | BLOOMBERG

Magyar’s government plans to establish a new environmental protection authority with powers to inflict fines of as much as 5 billion forint ($15 million) on big companies that rack up “three strikes” against the rules within five years.

Unveiling his first budget last week, Magyar said the government wanted to focus its attention on attracting “high-value” investors who would conduct research rather than build assembly plants.

“A research and development center is worth a hundred times one of the battery factories you brought us,” he told legislators from Orban’s now opposition Fidesz party.

The authorities already imposed fines on two factories owned by South Korea’s SK On, suspended production at part of a plant owned by South Korean cathode maker EcoPro, and fully halted operations at the Semcorp separator facility.

Key factory

While other plants are being built, in Malaysia and elsewhere, Semcorp’s Hungarian facility is one of the only suppliers outside China for now. Its separators are used in battery production in Europe and North America, a person familiar with the Semcorp situation said. Its website lists South Korea’s LG Corp. and China’s CATL, the world’s largest maker of car batteries, among its partners.

One manufacturing site, belonging to LG Energy Solution in Georgia, has been hit by supply disruption, the person said, declining to be identified when talking about non-public corporate matters. A spokesperson for LG Energy Solution said by email that the company maintains a “diversified sourcing strategy to ensure stable operations” and doesn’t rely entirely on Semcorp’s Debrecen factory.

Peter Magyar, leader of the Tisza Party and now prime minister, arrives at a campaign event near the CATL battery plant in Debrecen in July last year. | BLOOMBERG

Semcorp said the original reading that led to its plant being closed was the result of a lab error. Its site is now dotted with sampling wells drilled at a cost of some $500,000 to resample soil and groundwater across the entire territory to convince local authorities to let them restart operations. But for now, the giant plant is mostly silent, with a skeleton staff maintaining dormant machines.

Semcorp has also challenged the county government office’s decision in court and a judgment is still pending. The office said it can revisit the case once Semcorp’s soil sampling program is complete. “Production can only continue when the environmental office has approved the survey documents,” it said in a statement.

Though popular, the tougher line on environmental enforcement comes at a time when Orban’s bet on electric cars is starting to pay off.

Manufacturing output grew at its fastest pace in four years in September, official data showed, with growth concentrated in the automotive sector.

BMW’s new plant in Debrecen moved to three-shift production of its newest electric vehicle this month. Nearby, CATL of China has started trial production at a giant installation next to Semcorp’s. The area is now one of Europe’s leading battery-making hubs.

During the construction process of CATL’s factory, the company spent “a few million euros” to install a new cooling tower system that would reduce the amount of water it would use. The move came after public concern about the already-parched landscape.

“We didn’t realize water resources here are quite limited,” said Qin Liang, the plant’s operative manager. “After we realized we started to make an effort on water consumption.”

A worker on the production line at the CATL factory in Debrecen on Oct. 1 | BLOOMBERG

Hungary is hoping massive grid batteries will be the answer to the energy crunch it faced this summer when drought brought it to the brink of shutting its nuclear power plant. CATL’s Debrecen plant has the ability to build grid storage batteries, though is fully occupied supplying carmakers for years to come. A planned expansion will require government permission.

Frosty relationship

No one is taking that for granted now. Diplomats and officials from the battery companies say Magyar’s Tisza Party and his government are keeping their distance from the industry. People at two different companies said officials appeared to be under orders not to deal with them.

Magyar’s office referred questions on the battery industry to the Ministry for the Living Environment, which did not directly address a question on whether government representatives were avoiding the industry. It said Semcorp had challenged the environment authority’s rulings in court and that the accuracy of the soil samples was currently a subject of litigation.

Arriving at a rally in the central city of Szolnok last month, Magyar exchanged warm words with protesters opposing a planned Chinese electrolyte plant there. “For as long as Tisza is in power there will be no electrolyte factory in Szolnok,” he announced after taking the stage.

It’s a similar sentiment in Debrecen. The district’s parliamentary representative from Magyar’s party, Zsolt Tarkanyi, complained recently when the battery industry group wanted to have its national gathering in the city.

“They shouldn’t hold their event here,” Tarkanyi posted. “It’s outrageous that they call Debrecen the center of Europe’s battery industry when the population didn’t want them and is rightfully wary of them.”