questions & answers about Hungary

Hungary, Europe's new industrial centre of gravity. From manufacturing hub to advanced platform for e-mobility and innovation: investment opportunities for Italian companies.

Hungary is experiencing strong inflows of European and Asian capital as it evolves from a manufacturing hub into an advanced platform for e-mobility and innovation. In this interview, Kinga Hetényi, a local partner specialising in M&A at Schoenherr Hungary, explains why the country has become a key destination for gigafactories, clean energy technologies and high value-added investments – and what challenges investors must be prepared to navigate.

Hungary has become a key destination for foreign investors in Central Eastern Europe. Which sectors are currently experiencing the strongest growth, and where do you see the most tangible opportunities?

Hungary has established itself as a strategic manufacturing hub within the European Union. Significant investments from major European and Asian manufacturers have turned Hungary into a key player in the production of electric and traditional vehicles as well as batteries for e-mobility. We are seeing multibillion-euro gigafactory projects positioning the country as a crucial link in the supply chain of Europe's green transition.

Beyond automotive, the pharmaceutical and life science sectors continue to experience strong growth. There is increasing activity in the technology sector as well, especially in R&D centres and shared service operations, attracted by Hungary's skilled workforce and competitive operating costs.

Renewable energy also offers significant opportunities, especially in solar development, although investors must navigate an evolving regulatory environment. The agri-food and food processing industries present opportunities too, particularly for investors aiming to serve both the local and regional markets.

Italian companies have a notable presence in many of these sectors, demonstrating the successful integration of Italian industrial know-how into the Hungarian economy.

How has the investment landscape in Hungary changed over the past two decades, and how has this shaped how international companies approach the market?

The transformation has been remarkable. Twenty years ago, Hungary primarily attracted labour-intensive manufacturing activities. Today, we see high value-added investments in advanced manufacturing, R&D and innovation centres.

However, Hungary remains a formalistic jurisdiction. Administrative procedures – although improved – still require attention and patience. International companies have learned that success requires not only capital but also local expertise and relationship building.

Companies' decision-making has shifted from purely cost-based to strategic considerations: proximity to EU markets, availability of skilled labour and integration into European supply chains. Italian companies, many of which established themselves in Hungary in the early 2000s, have evolved from simple production sites to complex operations with local management and regional responsibilities. This evolution reflects the overall maturation of Hungary's investment landscape.

Which State aid instruments – currently available or expected in the near future – should investors be aware of?

Hungary offers various State aid instruments, primarily focused on job creation and capital investments. Grants and tax incentives are available for qualifying projects, especially in manufacturing and R&D activities, with particular support for investments in economically disadvantaged zones. The specific benefits depend on the size of the investment, its location and the number of jobs created.

For investments in the automotive and battery sectors, we have seen significant tailor-made incentive packages. However, these are subject to EU State aid rules and specific Hungarian requirements, and careful planning is essential.

There are also grants for training and workforce development. It is crucial to engage the relevant authorities early on – the Hungarian Investment Promotion Agency (HIPA) and sectoral ministries – as negotiations can be complex and lengthy.

Additional tax incentives and forms of cooperation with local municipalities, generally negotiated on a case-by-case basis, also contribute to Hungary's attractiveness as an investment destination.

What are the most significant challenges for foreign investors — in terms of regulation, labour or administrative procedures — and how can they mitigate these risks?

The labour market is the most immediate challenge. Hungary has a low unemployment rate and competition for skilled workers is intense, especially in manufacturing clusters. Investors need comprehensive recruitment and retention strategies, often including competitive compensation packages, training programmes and, in some cases, recruitment from neighbouring countries.

Administratively, permitting procedures, although defined by law, can be lengthy and require precise documentation. My advice is to allocate sufficient time in project plans and to work with experienced local advisors who can efficiently manage these processes.

Regulatory changes may occur with relatively short notice, especially in taxation and sector-specific rules. It is essential to maintain flexibility in business planning and closely follow regulatory developments. Italian companies with established operations in Hungary have learned to incorporate these aspects into their planning.

How is investment protection ensured in Hungary? Which dispute resolution mechanisms are most commonly used by international companies?

As an EU Member State, Hungary provides the fundamental legal protections of the single market. The country also has bilateral investment treaties with numerous non-EU countries, offering additional protection mechanisms, including access to international arbitration. For Italian investors, the EU framework is the primary safeguard, although treaties with third countries may be relevant when structuring transactions involving non-EU partners.

In commercial disputes, international companies typically opt for arbitration, often under ICC or Vienna rules, with seats outside Hungary. This reflects a preference for neutral and easily enforceable international mechanisms. The Budapest Chamber of Commerce and Industry also operates its own arbitration centre, often chosen for its lower costs.

Mediation is gaining traction in certain commercial disputes, especially when the parties wish to preserve their business relationship. However, litigation before Hungarian courts remains common for ordinary commercial matters and is mandatory for labour disputes and administrative appeals.

The energy sector is undergoing rapid transformation. What is the status and outlook in Hungary for renewable energy, large-scale energy storage and small modular nuclear reactors (SMRs)? What opportunities or regulatory challenges should investors consider?

Hungary's renewable energy landscape has developed in a very unbalanced way, with nearly 9 GW of solar installed in the past decade but very limited progress in complementary technologies such as wind and hydro. This creates an urgent need for large-scale storage systems to stabilise the grid.

Investors are closely watching the introduction of the new competitive grid capacity allocation scheme, now expected in Q2 2026, as prolonged delays have essentially prevented developers from obtaining new grid connection rights for years. Meanwhile, regulators are encouraging hybrid solutions – such as solar plants with co-located storage – to make better use of underutilised grid nodes.

Wind development is expected to restart after a decade of restrictive policies, opening new opportunities in the renewable mix. Additionally, recent nuclear cooperation between the United States and Hungary has paved the way for preparatory work on SMRs, although details remain limited, and investors should monitor regulatory developments as the government seeks parliamentary approval to initiate national SMR planning.

In large-scale projects such as infrastructure, automotive or manufacturing, which legal or regulatory issues arise most frequently, and how should investors prepare?

In large-scale infrastructure, automotive or manufacturing projects, the main legal and regulatory considerations typically concern permitting, zoning and the management of investment incentive programmes.

Hungary remains an attractive destination for both Western and Asian investors, including the growing number of Chinese and Korean companies bringing diverse perspectives and business cultures. Investors consistently highlight the country's transparent procedures, efficient corporate and land administration, cooperative authorities and well-developed advisory ecosystem.

We generally recommend initiating early dialogue with the government – through HIPA – and with local municipalities, as large-scale projects often receive tailor-made incentives, such as tax benefits or even "special priority" or "VIP" status, which accelerates the permitting process.

If you could give one piece of advice to an Italian company considering its first investment in Hungary today, what should be the top priority?

Hungary offers real opportunities, but success requires more than a strong business case on paper.

I strongly recommend speaking with other Italian companies already successfully operating in the country. The Italian business community is well-established and generally willing to share practical insights – from managing administrative procedures to dealing with labour relations. Their experience can be invaluable in avoiding common pitfalls.

Engage experienced local advisors early who understand both the formal legal requirements and the practical dynamics of doing business in Hungary. Build relationships with relevant authorities and industry associations. Visit potential sites and conduct due diligence not only on legal and financial aspects, but also on operational realities such as labour availability and supply chain logistics.

The companies that succeed are those that combine strategic vision with tactical flexibility and strong local expertise. Don't rush: a well-prepared investment will deliver far better returns than one executed hastily.

Kinga Hetényi | Partner | Schoenherr Hungary
T: +36 20 910 6506 | E: k.hetenyi@schoenherr.eu

Daniele Iàcona | Head of Italian Hub | Senior Attorney at Law
T: +40 733 730 119 | E: d.iacona@schoenherr.eu