Mercedes expands Hungary plant to become its largest in Europe as German carmakers shift production east
The Kecskemét site, now capable of producing up to 400,000 vehicles a year, will build the electric C-Class alongside existing A-Class and GLB models. Production costs in Hungary run roughly 70% below German levels.
A new scale in Kecskemét
Mercedes-Benz opened a major expansion of its plant in Kecskemét, roughly 80 kilometres southeast of Budapest, on Monday. The company invested over one billion euros, making the facility the largest car factory in Hungary and, by its own account, the biggest Mercedes plant in Europe. The site can now produce up to 400,000 vehicles annually. The new Hungarian prime minister, Peter Magyar, was expected at the opening ceremony scheduled for 10:15.
The expansion adds two halls for body and assembly lines, a paint shop, and a battery assembly unit. The electric C-Class joins the existing A-Class and GLB SUV on the production lines. Further production orders are likely to follow.
The cost arithmetic
Mercedes management under CEO Ola Källenius is executing a strategy to double the share of production in European low-wage countries from 15% to 30%. In Germany, maximum possible production will shrink further in the coming years, to 900,000 vehicles. The company has complained about structural costs in Germany, especially for labour, calling them uncompetitive internationally. A recent letter to employees stated that every new product assigned to a German site worsens the relative cost position.
In Hungary, production costs are roughly 70% below the German level, according to Mercedes CFO Harald Wilhelm. Helena Wisbert, professor of automotive economics at Ostfalia University in Wolfsburg, considers that figure plausible.
Production costs in Germany are the highest in the world in the automotive industry.
A German cluster in central Europe
Mercedes is not alone. About two and a half hours away by car, in Debrecen in eastern Hungary, BMW opened a state-of-the-art plant last autumn, investing over two billion euros. The factory is designed for electric vehicles and started with the new iX3 SUV. At the other end of the country, in Győr, Audi produces the Q3 SUV and a Cupra model. In 2025, over 200,000 vehicles rolled off the line there, alongside nearly 1.6 million petrol, diesel, and electric drives and body components. VW Group CEO Oliver Blume's restructuring plans are expected to increase the importance of the Győr plant, together with the nearby Bratislava site in Slovakia.
A whole ecosystem of German automotive suppliers has formed around these factories. Frank Schwope, an industry expert at the Fachhochschule des Mittelstands, noted that suppliers with long histories with a manufacturer typically follow them abroad to benefit from the new plants.
Why Hungary wins the investment
Hungary does more than offer low wages, Wisbert said. The country provides subsidy programmes and supports companies with settlement, permits, and infrastructure development. The central European location attracts not only German manufacturers. Hungary is also a destination for plants from BYD and battery maker CATL.
The broader pressure on the German auto industry is acute. Tariffs and intense competition in China have weighed on sales, revenue, and profit, which have all declined recently. The shift of production capacity to Hungary is a direct response to those margin pressures.
- Mercedes Kecskemét (expanded)
- 400000 vehicles
- Audi Győr (2025 actual)
- 200000 vehicles
- Audi Győr produces over 200,000 vehicles and nearly 1.6 million engines and drives.
- BMW opens a two-billion-euro EV plant in Debrecen, starting with the iX3 SUV.
- Mercedes opens the expanded Kecskemét plant, now Europe's largest Mercedes factory.
