BMW is ramping up investments in its new electric vehicle plant in Hungary.

Around a further billion euros are to be invested in Debrecen by 2025, the car company announced on Friday.

For the planned all-electric cars of the so-called "New Class", BMW is building a factory for high-voltage batteries, which will employ an additional 500 people.

According to Production Director Milan Nedeljković, “the most modern plant in the world” is to be built in Debrecen.

"Here we are setting new industry standards in vehicle production with our i-Factory: lean, green, digital," he said.

Henning Peitsmeier

Business correspondent in Munich.

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Michael Seiser

Business correspondent for Austria and Hungary based in Vienna.

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In the second largest Hungarian city, which lies on the border with Romania, BMW wants to install round sixth-generation battery cells in high-voltage battery housings.

The group expects the new cells to increase the charging speed by up to 30 percent and increase the car range by up to 30 percent.

The production of the high-voltage batteries is to begin with the start of vehicle production.

At the beginning of June, BMW laid the foundation stone for the plant, in which more than one billion euros are already being invested.

The people of Munich received around 34 million euros in support from the Hungarian government under Prime Minister Viktor Orbán.

Hungary is massively promoting the production of e-batteries and has also caused irritation within the European Union.

The authoritarian Orbán regime has long been criticized by the European Commission.

Brussels is dissatisfied with the government's efforts to fight corruption in the country and therefore wants to freeze billions in subsidies.

The new rule of law mechanism allows the Commission to withhold funding when deficiencies in the rule of law and the fight against corruption jeopardize their proper use.

If the EU finance ministers actually cut the funds, it would be a serious setback for the small Central European country.

Generous subsidies for auto industry

The automotive industry, including its suppliers, is considered a key sector that has long benefited from generous subsidies from the Orbán government.

Around 30 million euros will flow into the new BMW plant.

The world's largest battery manufacturer, Contemporary Amperex Technology Co. Limited ( CATL ), is also building its second European plant in Debrecen, alongside the German location in Erfurt.

With the equivalent of 7.5 billion euros, CATL is the largest single investment in Hungary.

It is spread over several years.

For comparison: All foreign investors pour around 10 billion euros into Hungary every year, around a third comes from German investors.

In the EU, it also depends on the economic strength of a region how much a country is allowed to financially support settlements.

Because Eastern Hungary is considered one of the poorest regions in the EU, a company willing to settle there will receive up to 50 percent of the project costs reimbursed by the government as financial aid.

Although many international companies have invested heavily in Hungary in recent months, managers of German companies are not very optimistic about the future.

According to the latest economic survey by the German-Hungarian Chamber of Industry and Commerce (DUIHK), the business climate in Hungary fell to a multi-year low in autumn.

The business outlook and economic expectations have not been rated so poorly since the 2008/09 financial crisis.

In the Chamber's view, the fundamental shifts in the international division of labor could open up new economic opportunities for the region of Central and Eastern Europe in the longer term - provided the countries can create the right framework conditions for the economy.

According to the Chamber's most recent survey, almost every second company is planning to cut back its capital expenditure.

The situation is more positive when it comes to employment: Although only one in five companies is planning new hires, only 15 percent are thinking of downsizing.

According to the chamber, this is also “thanks” to the labor shortage, which is causing employers to keep their current workforce.