Announcement about Chinese factory to be built in Hatvan made without informing mayor about plans

"On Monday, Péter Szijjártó announced that the Chinese automotive company Xinzhi will be opening a factory in Hatvan. This was unexpected news for us, as no one had consulted with the town about it. We can only support such an investment if it is beneficial and useful for the community of Hatvan going forward. We immediately started gathering information, which we have so far received exclusively from HIPA – the Hungarian Investment Promotion Agency," Richárd Horváth, Mayor of Hatvan, wrote on his Facebook page on Tuesday.

According to Horváth, based on the information received from HIPA, this is what they know today:

• "Chinese delegations visit Hatvan frequently with the intention of investing. According to HIPA, the representatives of Xinzhi also inquired in person in 2023. However, there was no discussion about specifics with the city afterwards.
• Xinzhi is building its factory on a piece of state-owned industrial land in Hatvan.
• The industrial development is worth more than HUF 50 billion and will create more than 800 jobs.
• Xinzhi produces components for various engines. HIPA has confirmed that the company does not produce batteries and there are no plans for such production in Hatvan."

Minister of Foreign Affairs and Trade Péter Szijjártó announced on Monday that China's Xinzhi would build a plant employing nearly 900 people in Hatvan, a city of 20,000 people, the total value of the investment amounting to HUF 50 billion. The company will employ 30 engineers engaged in research and development.

However, as the town's mayor has said himself, they forgot to inform him about this, which is why Richárd Horváth wrote:

“We are initiating further consultations with representatives of the factory and government officials, because we consider it unacceptable that Hatvan is left out of a decision and investment in our town that will affect our future.”

The town's mayor has also complained because, under the HIPA reform law, introduced by Tibor Navracsics, the Minister for Regional Development and Public Administration, the business tax revenue from the factory's operation will not be received by the town but by the state, and through it, the district. In other words, Hatvan was given a factory with a workforce of 900 people, while losing the most important advantage of this, the opportunity to collect local taxes.

They intend to build a million stators a year in Hatvan

According to their website, the Chinese company's predecessor was founded in 1990 to produce components for conventional car engines, and is headquartered in the city of Taizhou in the southeastern Chinese district of Jiaojiang. Xinzhi Motor Co. was registered in 2010, when it built the factory that has since become the world's largest producer of stators.

The company has been listed on the Shenzhen Stock Exchange since 2012, and the price of its shares grew exponentially until 2015, when it dropped to less than half its value. After 2018, the share price fell again, to around 15 yuan (820 forints) per share, representing a total company value of around HUF 330 billion. In this context, the HUF 50 billion investment in Hungary is considered significant.

Xinzhi used to be what is known as a Tier 2 automotive supplier, meaning that it did not sell its products directly to car manufacturers, but to engine and component manufacturers that supply car manufacturers. Its major customers, according to its website, include Valeo, Bosch and Denso, to which it provides 'professional supporting services' in addition to parts.

Xinzhi took a step forward last year when they announced that they would be supplying stator and rotor components for electric motors directly to Volkswagen. Shortly afterwards, they signed a similar deal with another car manufacturer: they will also supply similar parts to the tune of HUF 27 billion for the Aito car brand, which is a joint development and production project between China's Seres Group and Huawei.

Szijjártós's announcement coincided with the Chinese company's announcement stating that they will spend up to one billion yuan (55 billion forints) to build the Hungarian manufacturing base, which includes the purchase of the land, the construction of the factory building and the purchase of equipment. The Hungarian company would be set up as a subsidiary of Xinzhi Holdings Limited of Singapore, under the name Xinzhi Motor Hungary Kft.

According to the Chinese announcement, the factory in Hatvan will be capable of producing one million stator parts for electric motors per year. It is interesting that the communication uses the term 'assembly project', which suggests that the components will not be produced in Hatvan, but will only be assembled here ((This is also implied by the low budget but high manpower requirements of the investment, i.e. they will need few machines but a lot of people for production.)

Xinzhi also said that production capacity would be built up gradually, in accordance with market demand, and that additional investment could be made if the project progresses smoothly. Based on this, it is possible that in the first round the number of employees will be much lower than indicated in the announcement, with the possibility of expanding at a later stage.