Hungarian vehicle makers hit by supply chain shortage

Hungarian vehicle makers hit by supply chain shortage
Daimler Chairman Dieter Zetsche (right) and Prime Minister Viktor Orban (centre) at the launch of the Kecskemet plant in 2012. / Daimler
By bne IntelliNews January 20, 2021

Mercedes-Benz Manufacturing Hungary will halt production at its Hungary factory for 10 days starting from Wednesday due to the global shortage of computer chips, the company announced on January 19.

The shutdown comes just three days after production resumed at the Kecskemet plant after a month-long winter halt.  Daimler also shut down production in Hungary in the spring for a month due to the pandemic.

In a statement, Daimler said it will continue its shift to the production of electric vehicles. Just before the winter break the company announced a HUF50bn (€139mn) investment to add fully electric vehicles to the production palette. The new pressing plant will start operation next year.

The company established its Hungarian plant in 2012 with a €800mn investment, which was the largest greenfield investment at the time. The plant is operating with 4,700 workers and has produced more than 1mn cars since, including 190,000 in 2019.

Daimler is not the only Hungarian carmaker affected by the supply chain shortage. Audi Hungaria will cut production to one shift starting this week. The temporary shift reductions could affect all plants, but Audi parent Volkswagen is working hard to resolve the issue as soon as possible, the company’s communications director told Hungarian media. 

The third major carmaker in Hungary Suzuki reported no disruptions in production. The Japanese carmaker, which has a manufacturing base in Esztergom, is working with its suppliers to keep production continuous, the business daily writes. Due to the pandemic, car parts suppliers, including chipmakers, switched from the car industry to meet strong demand from the consumer electronics sector.

The upswing in demand for vehicles in the fourth quarter has boosted production but as carmakers operate in just-time manufacturing mode, they had run out of stocks. The shortage of computer chips has led to disruptions at all major global carmakers.

The shutdown is bad news for the economy as the automotive industry is a major engine of the economy. The sector accounts for 5% of GDP, a fifth of all exports, and one-third of total industrial output. 

Thanks to significant capacity-building investments in recent years, the vehicle sector and connected sub-sectors have nearly doubled their performance since 2010, with a production value of HUF10 trillion.