German industry is collapsing: Mercedes moves production to Hungary... the great exodus has begun

The largest production facility of Mercedes-Benz is now outside Germany, as the plant in Kecskemét, Hungary, has evolved into the company's most important unit. The fully electric C-Class version is set to be manufactured at this specific plant from now on, while other models are expected to be added gradually. The CEO of Mercedes, Ola Källenius, appears particularly satisfied with the production conditions, stating characteristically that "the production cost here sets standards for all of Europe." The consequences of such a development for the industrial workforce are easy to perceive.

According to the company's estimates, production in Hungary entails up to 70% lower costs compared to a corresponding factory in Germany. The hourly labor cost in manufacturing amounts on average in Hungary to 15.60 euros, while in Germany it reaches 49.50 euros, which is more than triple. The duration of the typical workweek is also different: in Hungary it amounts to 40 hours, while in Germany, based on the collective agreement of IG Metall, it stands at 35 hours. Among the advantages cited by Mercedes is also the limited employee absenteeism due to illness. Among the Hungarian workforce, the average amounts to just three days annually, whereas in German factories the days of absence are more than double.

Hungary as a new industrial destination

This choice is not an isolated phenomenon. The policy of attracting productive investments to Hungary had already begun to yield results during the administration of Viktor Orbán. Now, even with the political change in Budapest, major German automakers continue to view the country as a particularly attractive manufacturing location. Mercedes is not the only German company that has followed this direction. BMW and Audi, as well as major component suppliers such as Continental and KACO, have transferred manufacturing operations to Hungary. KACO, in fact, is gradually transferring machinery from its traditional plant in Kirchardt, Baden-Württemberg—which has operated for more than 50 years—to facilities in Hungary. The director of KACO, Gernot-Alois Feil, acknowledges that the loss of 174 jobs in Germany is particularly painful. However, he maintains that the business environment in Germany is becoming increasingly difficult for manufacturing companies. In his view, German deindustrialization is accelerating, and the transfer of production activity abroad inevitably entails losses for the country's level of prosperity as well. Hungary's advantage, however, is not limited solely to lower labor costs, wages, or general production conditions. The Hungarian government also offers a particularly favorable tax regime to foreign enterprises that choose to invest in the country.

Hungary now attracts Chinese conglomerates as well

Hungary's momentum is also reflected in the growing presence of Chinese enterprises. A characteristic example is CATL, the world's largest battery cell manufacturer, which is preparing to operationalize its own "Giga-Factory" in Debrecen. At the same time, the Chinese automotive group BYD is constructing a large production unit in southern Hungary. There, the production of Chinese vehicles bearing the mark "Made in Europe" is expected to begin as early as next year. The trend of transferring production outside Germany is also reflected in a survey by the consulting firm Horváth, which was conducted among 1,000 top business executives operating in Germany. 60% of respondents stated that by 2030 they plan to transfer part of their production to a country with lower operational costs. An important role in this strategy is also played by the "Local-for-Local" model, according to which products should be manufactured as close as possible to the markets where they are to be consumed.

In this way, enterprises seek to mitigate risks in the global supply chain, but also to reduce additional costs associated with customs procedures and tariffs. Under these facts, Eastern European countries, with Hungary and Slovakia being among the primary choices, are expected to maintain their attractiveness for businesses. At the same time, it is estimated that the demand for labor in these specific countries will continue to increase. Regarding the future of employment in Germany, the most optimistic estimates identify scope for creating new jobs mainly in the sectors of research, technology, the development of new methods, and innovation. To capitalize on this potential, however, more active support from the state is considered necessary. This is, after all, one of the primary demands consistently voiced by both industry representatives and liberal economic theorists, who attribute a significant role to the state in creating a more competitive business environment. In any case, the return of production units from Hungary to Germany does not appear to be on the horizon, not even as a realistic scenario.

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