Automotive Trends: Operation Catch-Up

As automotive stakeholders struggle to stay relevant in an era shaped by electrification, self-driving and sustainability, they are forced to use every item in their toolkit to prevail. The 2023 Automotive Conference of the Hungarian Investment Promotion Agency (Hipa) provided key insights by senior executives of Hungarybased OEMs and renowned experts on the latest developments of the industry. What looks certain is that Western companies have a lot of catching up to do in the EV segment given Chinese competition has rushed ahead at break-neck speed.

Car sales have been dropping the past years worldwide which is normally bad news for stakeholders. However, since the drop stemmed from supply constraints rather than sluggish demand, top OEMs managed to improve profitability a great deal. The current rate of 7% is actually even expected to soar. Mercedes-Benz’s Hungarian operation was among the beneficiaries of the trend. It turns out they used the chip shortage as an opportunity, and they built semiconductors primarily into top end vehicles that generate more profits.

The plan worked so well that they intend to stick to it and increase sales of top end vehicles in every segment by 60% by 2026. Given that their “heritage is luxury”, that’s how they aim to keep profits high in the wake of the staggering costs of transition, Christian Wolff, managing director of Mercedes-Benz Manufacturing Hungary Kft. explains. Starting its biggest transformation of its history, the company invests EUR 1 billion in Kecskemét. “We will change the entire model portfolio of the existing plant and start building a second plant,” he provides a snapshot of the scale of ongoing investments.