We are undergoing a shift in how the world buys a vehicle. When the horseless carriage was invented there were a number of ways it could have gone. People tried steam, they tried battery or electric, but the technology at the time was the internal combustion engine. The horseless carriage replaced the horse and carriage for a number of reasons including thousands of horses walking around cities meant the streets were full of manure. A car meant cleaner streets and the choices that were made influenced how the normal family lived and worked. Years later, the public discovered a downside of a car meant pollution from automobiles and there has been efforts to change that. One effort is electric cars, but the profit per vehicle is less than the internal combustion engine or until costs to produce electric fall to the internal combustion model, automakers are hesitant to change. China which did not have many vehicles until recently, the government went all investments in electric vehicles. At present, because many of the investments in the infrastructure to build electric was done by the government, the producers who put the cars together have relatively low costs. In America, the government prefers the industry to put in the investments. The fact of the low costs means both European Countries or the European Union and the US want to impose tariffs on Chinese made electric cars to push the price.

In an article by Eric Reguly of the Globe and Mail, in the recent election in the US many politicians talked about manufacturing jobs. It is the same in Europe and the country of Hungary welcome Chinese investments. The second largest city in Hungary is Debrecen and a new $7.3 billion CATL battery plant is being built. CATL stands for Contemporary Amperex Technology Co. Ltd and the plant of 9,000 workers will supply batteries for more than 1 million electric vehicles.

Hungary is led by Prime Minister Victor Orban and his government courts both Chinese and Russian investments as well as being active in NATO which is helping Ukraine fight Russia.

The US imposed a 100% tariff on imported Chinese EVs, effectively eliminating the low-cost models from the market. (in China it is possible to buy an EV for $10,000 as a commuter vehicle).

In Hungary, the government welcomes investments from EV manufacturing including CATL, Eve Energy, Sunwoda, Samsung SDI, and SK Innovation.

Originally, VW, BMW and Mercedes welcomed the Hungarian battery plants and Mercedes will be the largest customer of the CATL batteries.

BYD, which overtook Tesla to be the largest maker of EVs, measured by unit sales, announced it will build a plant in Szeged located in southern Hungary. It will be the European Union’s (EU) first Chinese=owned EV assembly plant and its products will be sold tariff-free across the EU’s 27 member countries.

For Hungary, foreign investment was over $15 billion. For the auto industry in Europe, question marks are high. Prime Minister Orban wishes to be in the world’s top 5 battery makers.

For Chinese EV companies, the land in Hungary is relatively cheap, as is labor and energy. In addition, Hungary offered subsidies of $2.5 billion.

Linking to dividend paying stocks, sometimes countries use tariffs to protect the companies within its borders and that can be a good thing, in the past and likely in the future using tariffs have been election issues. However, when the foreign company builds a factory in the country to get around the tariffs, is that good politically? economically? will the local politicians now try to protect the foreign company and its domestic workers. Often times, profitable companies have and can have longer term horizons, politicians tend to have short term horizons and longer term tends to win out in the end.

There are more questions than answers, till the next time – to raising questions.