• Mercedes-Benz to invest 1 billion euros at site in Kecskemet
  • Plant to be completed by end of decade, production head says

Daimler AG’s Mercedes-Benz luxury-car division will double its contribution to Hungary’s gross domestic product with a 1 billion-euro ($1.11 billion) investment to expand production there, Foreign Minister Peter Szijjarto said.

The new plant, to be built at the company’s existing factory in Kecskemet, will increase Daimler’s contribution to Hungary’s GDP to 0.4 percent, Szijjarto said Friday at a news conference in Budapest, without specifying a time frame. The plant will be completed by the end of the decade and create 2,500 direct jobs, Markus Schaefer, production chief of Daimler’s Mercedes Benz Cars unit, said at the press conference.

Daimler’s decision to build front- and rear-wheel-drive cars in Kecskemet will bolster Prime Minister Viktor Orban’s efforts to boost economic growth amid concerns that expansion is waning. GDP unexpectedly contracted in the first quarter from the previous three months, though the cabinet has said its 2.5 percent growth target for this year is intact. Volkswagen AG’s Audi marque, Suzuki Motor Corp. and General Motors Co.’s Opel also have car factories in Hungary.

The government will subsidize the Mercedes project with 12.9 billion forint ($46 million) and will upgrade the area’s infrastructure, including highways as well as rail and air links, Szijjarto said.

The current factory in Kecskemet started operating in 2012 and has since produced more than 500,000 cars. It currently builds B-class compact cars as well as the CLA sedan and CLA Shooting Brake wagon.

Hungary, like eastern European neighbors Czech Republic and Slovakia, relies on carmakers to power its economy. Auto production accounts for the biggest share of Hungary’s industrial output at close to 30 percent of the headline figure.

The forint strengthened to as low as 311.44 per euro on Thursday, the strongest in a month, after the government announced that a new car factory would be built, before Daimler was named as the investor. The currency traded at 312 per euro as of 12:08 p.m. Friday in Budapest.

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