Has the pace of battery production stalled?
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According to recent reports, 600 workers were laid off at the newest Hungarian battery factory following its trial run. The layoffs affected foreign guest workers, with the factory citing a global decrease in demand for electric vehicles, and consequently, for the batteries they produce. The factory has promised that these layoffs will not affect Hungarian workers.
The Hungarian government’s economic policy is centered around the development of car battery factories, aiming to make Hungary a significant producer of this crucial component for electric vehicles. Critics argue that Hungary lacks both the necessary workforce and raw materials to sustain long-term production capacity.
The rise of battery production has also raised environmental concerns due to the significant energy and water consumption involved in the process, as well as the challenge of waste management. Additionally, the Hungarian economy’s one-sided dependence on battery production could be risky if global demand decreases or technology changes.
Dóra Győrffy’s article “Industrial Policy and Battery Production in Hungary and Sweden” in the Közgazdasági Szemle addresses the contradictions surrounding the establishment of battery factories. The article examines the extent to which the battery production growing with significant government support contributes to long-term economic convergence. http://www.kszemle.hu
The author analyzes the Hungarian battery strategy in the historical context of industrial policy and compares it to the Swedish model. She concludes that while the Swedish strategy follows 21st-century industrial policy concepts, the Hungarian one resembles the practices of the socialist system.
The study points out that Hungary does not have comparative advantages in battery production, so an industrial policy built on this could be detrimental to both economic development and environmental protection. In contrast, in Sweden, due to comparative advantages, the goals of economic development and environmental protection reinforce each other.
Overall, the article paints a critical picture of the Hungarian battery strategy and highlights that ignoring comparative disadvantages can have harmful consequences in the long run.
Other forecasts suggest that electric vehicle sales are declining not only due to the lack of adequate charging and service infrastructure but also because electric cars are still too expensive to become a mass product.
Reports indicate that the leading American manufacturer produced 39,000 unsold cars in the first quarter, and there is a fierce battle for global market share among Chinese, American, and European manufacturers.
Despite the significant increase in the number of electric cars, for example, in Norway, gasoline consumption has not decreased because buyers use electric cars only for short-distance travel and have kept their traditional fuel-powered cars for longer trips. Additionally, heavy-duty vehicles with higher fuel consumption cannot currently be electrified, so the number of fossil fuel-powered vehicles is not decreasing.
The US government intends to mitigate the price advantage of Chinese car manufacturers with a 100% protective tariff, but the European Union has not decided to introduce a protective tariff, which could further reduce demand and battery production volumes.
If the decrease in demand for electric cars proves to be lasting, the Hungarian industrial policy concepts will not adequately serve the country’s economic development.