Mercedes-Benz with a billion euros in Hungary is expanding its largest plant in Europe

Mercedes-Benz has invested one billion euros in expanding its largest factory in Europe, located in Kecskemét, Hungary. The expansion will focus on producing new electric vehicles in the C-class range, making the plant the company’s biggest production site in the continent once completed. This move comes amid growing global competition in technology and cost efficiency, with the Hungarian government highlighting the country's low labor costs as a key factor in attracting foreign investment. The expansion, which began earlier this year, aims to increase annual production capacity to 350,000 units and create approximately 3,000 new jobs. As of late May, Mercedes-Benz had already employed nearly 5,200 workers at the facility. Once fully operational, the Kecskemét plant will rank second globally among Mercedes-Benz factories, following the Tuscaloosa plant in Alabama, USA. The project marks a strategic shift toward electric vehicle production, aligning with broader industry trends and regulatory pressures for sustainability. Hungary has long been a favored location for automotive manufacturing due to its relatively low labor costs compared to other European Union countries. Despite recent increases in wages, average salaries remain among the lowest in the EU, continuing to attract companies seeking cost-effective production solutions. This economic advantage has played a crucial role in drawing major automakers and battery manufacturers to the region over the past decade. Under the leadership of former Prime Minister Viktor Orbán, who stepped down after losing parliamentary elections in April, the automotive sector and battery production have become central pillars of Hungary’s economic growth and employment strategy. During his tenure, several German premium car brands and Chinese battery producers established operations in the country, contributing significantly to both industrial output and job creation. The government has since emphasized the need for stable business environments and predictable regulations to maintain investor confidence. At the official opening of the expanded facility, Mercedes-Benz Chief Executive Officer Ola Källenius highlighted the importance of local production capabilities, particularly in critical components such as batteries. “With localized production of essential parts, we can respond more quickly and flexibly to market demands,” he stated. Källenius added that Kecskemét is a vital location for the company’s future, emphasizing the value of creating infrastructure rather than relying solely on external factors. Hungarian Prime Minister Péter Márton reiterated the government’s commitment to maintaining a stable and attractive business environment for foreign investors. He noted that while the previous administration under Orbán faced challenges related to frequent legal changes and special tax measures, the current government is focused on fostering long-term partnerships. Márton stressed that all businesses operating in Hungary must comply with regulations, ensure safe working conditions, and provide fair compensation to employees. In addition to the C-class electric models, the Kecskemét plant will also produce two additional models, the electric GLS and a smaller G-class variant. According to Michael Schiebe, a member of the German company’s management responsible for production, the plant plans to implement flexible production lines alongside German facilities. “This approach will allow us to adapt production models across different locations, enabling faster responses to market demand and external factors, thereby strengthening our global production network,” Schiebe explained. The Kecskemét plant, which started operations in 2012, initially produced smaller, more affordable models. Now, it is shifting its focus toward the C-class electric vehicle, a core part of Mercedes-Benz’s product lineup due to its popularity and profitability. This transition reflects the company’s broader strategy to expand its electric vehicle offerings and meet evolving consumer preferences.