Hungary may use EU money to help Chinese carmaker, Brussels could retaliate
The European Commission is generally concerned about Chinese expansion in the EU's internal market and has previously launched an investigation into state subsidies for cheap Chinese electric cars, which it believes threaten EU manufacturers.
This is why it is surprising that the Hungarian government could tailor its e-car subsidy programme to China's BYD, which is building a factory in Szeged, using €240 million of REPowerEU funds.
The EC does not investigate the beneficiaries of Recovery and Resilience Fund (RRF) payments before the actual disbursements, but stresses the possibility of using trade policy instruments if third countries are unduly linked to investments made with EU funds, Hungarian daily Népszava learnt from the European Commission on Tuesday.
Hungary's recovery plan (RRP) has been adopted, but the government has not yet submitted a payment request due to pending rule of law reforms. The EC has so far disbursed only around €900 million as pre-payment under the REPowerEU programme, of which a total of €4.6 billion would be due to the Hungarian budget.
Supporting BYD raises the question of how this could affect competition between the European and Chinese car industries.
From 2023, the European Commission has been able to use a foreign state aid monitoring system to check what incentives a company in a non-EU jurisdiction has received in its home country. Investments in the Hungarian battery industry could easily become a target of procedures under the Foreign Subsidies Regulation (FSR).
Cover photo: BYD production base in Hefei, China on 23 August 2023. Source: Costfoto/NurPhoto via Getty Images
