Daimler announces €250mn expansion of Hungarian plant

By bne IntelliNews March 23, 2016

German car manufacturer Daimler announced on March 22 it will invest €250mn at its Hungarian plant.

The report of the investment in technological development and capacity expansion at the Kecskemet Mercedes factory may be somewhat disappointing for Budapest. The German carmaker has sparked a tussle in Central and Eastern Europe in recent weeks as it seeks to place possibly two new major plants in the region. Hungary has long hoped to see a large scale expansion of the plant it hosts. On the other hand, it may be Poland, Slovakia and Romania, which have been named as possible locations for a new engine factory and perhaps a new production centre, that are set for a let down.

The new investment at the Hungarian plant should be completed in 2018. The expansion will allow more flexible and efficient production of next-generation compact car bodies by using cutting-edge technology, Daimler said in a statement. The plan will bring Daimler’s total investments in the Hungarian plant to more than €1.3bn.

"The investment is a clear sign of the commitment to Kecskemet and it will create the necessary conditions for the successful production of our next-generation compact cars. This decision is a proof of Mercedes-Benz’s long-term plans in Hungary," Christian Wolff, director of Meredes-Benz Manufacturing Hungary, said.

Daimler acquired a 441-hectare plot in Hungary in 2008, of which it currently uses only 160 hectares. The company originally planned to to use the remaining area to build a second plant to double capacity to 300,000 units, but that was derailed by the financial crisis.

Since 2012, when Kecskemet launched production of the Mercedes B-class model, Damiler has been suggesting it will look again at the plan. The factory now also produces the CLA model, but a second major investment has not been forthcoming.

Resembling the race whipped up amongst CEE countries last year to host a €1.3bn plant for Jaguar Land Rover - which was eventually won by Slovakia, reportedly wielding huge incentives - Daimler appears to be doing its best to spread speculation around CEE. Kecskemet was thought to offer  Hungary a potential advantage. However, Daimler is also present in Romania through the Star Transmission unit, which announced earlier this month it will start production at its new transmission plant in Sebes on April 4.

“We have had a positive experience in Romania thanks to the gearbox factory, which is a very good one. Having a gearbox factory there represents an advantage for Romania,” the head of Daimler's management board, Dieter Zetsche, said earlier this month.

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