Hungary is positioning itself for the automotive future. Prof. László Palkovics, Minister for Research and Higher Education and former Head of Department R&D at Knorr-Bremse, on the role that the country intends to play in international automotive production.
Prof. László Palkovics/ Budapest University for Technology
What position does Hungary take in in the global automotive industry?
It is an advantage, for sure, to know about Hungary’s industrial history. We always have had a relatively strong car industry. In the Comecon we had the task to manufacture busses and trucks. The Ikarus buses were our flagship. This formerly well-functioning industry practically collapsed in the 1990s. But a new car industry was built on its ruins.
In the early 1990s, many – mainly German, but not just German – companies came to Hungary to build up their production. There were already many workers here with a simple but good training. And the environment for investment was positive. This was also the case in the other countries of the V4 group.
Over the years we witnessed, though, how the multinational companies went to China, how they returned and said that they could optimise the whole supply chain much better in Central and Eastern Europe rather than in China, thus expanding production here. The result of this development: These V4 countries have today a well-functioning multinational, but not a local car industry. The national suppliers here in the V4 countries are SMEs, which have a strong focus on multinational companies as customers. The prices are ok, the quality is also very good, and the logistics work without problems. But the local companies produce for their customers largely without their own intellectual properties. Not having your very own products, this makes one dependent. A stronger entrepreneurial mindset – that should be the next step in my opinion.
What is very positive, though, is that since the mid 90ies more and more companies started R&D activities in Hungary. I was lucky and could participate in this research and development process not only for my own employer at the time Knorr-Bremse, but also as a professor at the university. This was a really exciting time when Knorr-Bremse and others like ThyssenKrupp, Bosch, Continental and Audi began to build up a high-quality development in Hungary. The goal was not to remain the extended workbench, but to build the same high-quality activities as offered in Stuttgart or Munich. In this way, we are developing a new position in the manufacturing of the global automotive industry, from OEMs to different levels. Hungary wants to be an innovation hub for the automotive industry. For this, we have all the skills in the country.
There are recognisable upheavals in the automotive industry nowadays with electromobility, autonomous driving, industry 4.0 – how does Hungary position itself in these fields?
We are not at all behind in this development, but rather at the forefront. And that is a tradition. I remember Professor Michelberger, the former chief architect at Ikarus, who, as an engineer, had inspired Hungarian vehicle production for many years. In the middle of the 80s, he pointed out that the next trend after the buses was to be anticipated – the electronics in the car, that is, controllable systems like the suspension, the brake or the four-wheel steering. He contributed significantly to the academic environment in Hungary, the universities and research institutes, so that we could position ourselves here in this field.
The first article about an active suspension was written ’84. At that time, I was still a student at the university and I was writing my doctoral thesis on active and semi-active wheel suspension. We at the university built on this active suspension and that was how the first idea for ESP emerged.We also had patents on the ESP, which not everyone believed. Colleagues from chairs in Germany, who came to Hungary around 1994, said that talking about ESP in Hungary was like carrying water to the sea.
From 1994, Knorr-Bremse decided to extend their development department to Hungary. Today, the company employs over 500 engineers in Hungary. At ThyssenKrupp, almost 1,000 engineers are working on electrol systems and autonomous vehicles. This is a strong development here. If a large Swabian manufacturer has to decide whether to start a project for the autonomous vehicles in Palo Alto or in Stuttgart or in Budapest, they have all good reasons to choose Budapest. We have introduced our expertise in automated vehicles also in projects in San Diego, California.
Obviously, we should not stop here, given our results so far, but we must develop further. That is why we have started research projects and training programs for autonomous driving in form of Master studies and in English language.
On the subject of entrepreneurship: What role do Start-Ups play as a bridge connecting the university to the industrial practice?
The Start-Up scene is not strong enough yet in Hungary. The reason for this is the fact that Hungarian industrial development has aligned itself with multinational companies. Working for a multinational company, either as an employee or as a small supplier, is still safer than starting up your own business. Students at the university say: “I can work at Bosch or Continental in Hungary and do high-quality engineering work, so why should I take the risk and establish my own company?” So the scene has been very weak so far. But today a new generation arises, with a different mentality. And that is where we adapt and are now promoting this startup mentality in all our new research or university programs. At the University of Szeged, we are financing computer scientists. And if something goes wrong in the founding story, there is still a positive learning effect.
Nevertheless, we could be a bit faster. If you look at our neighbours Slovenia, a smaller country with 2 million inhabitants and quite a few multinational companies, you will see that the clusters of SMEs in the automotive industry are strong, and that they produce their very own products.
Does Hungary want to become attractive to SMEs and even Start-Ups from Germany, who are looking for resources and people?
Yes, absolutely. I am certain that the car world will look a lot different than it does today within the next 10 years. The vehicle itself is likely to become less important than the whole organization, the network of vehicles. How we use our cars will be the central question. I think that in this area, smaller companies are much faster and have better chances than the big ones. Horvath & Partner have reported to me how they make data-based evaluations for a large car manufacturer in Germany. There are new business models, which can be taken over much better by small companies. I see chances there already.
And what developments do you see in the labor market, the wage development and the practice-oriented education in Hungary?
It is true that the wages rise. If the efficiency increases faster than the working wages, that is the way it should be. In Central Europe, the Hungarian average wages are the lowest and the local workforce is no less efficient. For companies, investment is nothing unusual. This also applies to the relationship between the industry and the universities. Was it not the same in Germany in the 1970s? At that time the companies complained that the theory at the universities was good, but there was no practical orientation. They began investing and cooperating with the universities. Solutions like the dual universities in Baden-Württemberg evolved out of those cooperations and investments. The German companies brought what they had devised also into the universities.
Exactly this is happening now in Hungary. Since 2014, we also have the dual universities and we are cooperating with Baden-Württemberg. Daimler, for example, brought this culture to Kecskemet, where we initiated the first pilot project and which is now being extended to the country. We already have more than 1000 students in dual training after two years, over 600 companies are engaged there, and all this works very well. The companies have to do a lot here, of course, but they do. I was in Szombathely yesterday, also a very strong automobile industry with Opel, LuK and others. Three years ago, we started there a new course for mechanical engineers. This works excellently when the companies, the local society, the government and the universities cooperate.
On the topic of Brain Drain: Universities hold and cultivate a high quality of education, graduates are asked on every labor market in the world, not just in Hungary…
There is no uniform picture here. If the conditions are financially fair, further development is possible and the work environment is positive, the Hungarian engineers do not go to Germany or abroad. Take Knorr-Bremse as an example: the fluctuation in the development area is very small. Up to three years ago, the fluctuation was two to three percent and this fluctuation remained within the company, with the employees heading to the company’s locations in Germany, America or India.
Of course, the Hungarian companies invest in the training and the education, ie doctor training, dentist training or engineering training. Here, the students study for free, which is financed by taxes. And those who were financed by a company should give something back to them.
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