Pole Position: UBS European & US Autos Daily

Research evidence excerpt

Pole Position: UBS European & US Autos Daily

China Battery Materials: "Hungary battery supply chain

investment risk assessment - Expert call takeaway"

See our full report here

Hungary realigns with EU policy framework

We hosted Ms. Ruishu Hong from Mingxi Consulting for a discussion on Hungary

battery supply chain investment risk assessment. Our key takeaways include: (1)

According to the expert, Hungary’s new government may have less discretion in

allocating investment incentives and to operate more closely within the EU's broader

policy framework; (2) Existing Chinese investments in Hungary are unlikely to face

material disruption, production should resume once environmental protection

requirements are met; 3) new capacity expansion may slow down due to stricter scrutiny

and fewer subsidies.

Materials: resumption after environment issue resolved

The expert believes existing Chinese battery materials projects in Hungary, including

Yunnan Energy's separator plant in Debrecen (link), can resume operations once

environmental compliance issues are resolved. The wholly owned investment model

remains permitted currently, and the expert expects any mandatory change to existing

equity ownership would likely face resistance from both company and member states.

Overall, operational risks for existing Chinese battery materials facilities appear limited.

Battery: capex slowing down

The EU parliament has stated that Hungary's breaches of the rule of law threaten

European values and misuse of EU funds (link), and the expert expects that Hungary will

now realign with the EU’s broader policy framework and have less discretion on budget

allocation. The expert believes this could slow down battery makers’ capex, especially