Reviving Hungary’s bus manufacturing industry — Confusion, chaos and concerns of corruption

The much needed refurbishment of Budapest’s M3 metro line, which is now potentially a safety hazard for both passengers and the Budapest Transportation Company’s employees alike, is being postponed to November, due to confusion around what type of replacement buses will be used during the two year period when the subway line is out of commission. Budapest officials had earlier sought to purchase very reasonably prices Solaris buses from Poland, but the Orbán government had a different idea. Four years ago, the government had announced a strategy to revive Hungary’s largely moribund bus manufacturing industry. These efforts failed, but with Budapest having to invest in over a hundred new buses, in order to replace metro service along the city’s longest subway line, the Orbán government sees a golden opportunity to give the bus manufacturing sector in Hungary a boost.

Hungary was once the Eastern bloc’s leader when it came to manufacturing buses. While other Eastern bloc countries like Czechoslovakia, the German Democratic Republic and Romania manufactured automobiles, Hungary was known throughout the region and in the Soviet Union for its Ikarus buses. Ikarus was established in 1895, but it really only gained a strong foothold in foreign markets after 1955, with a new model that became the rolling stock of transportation companies as far away as Burma, Canada and Egypt. (In Canada, Ikarus buses transported passengers both in Ottawa and Toronto, on its signature articulated buses.)  Sales increased almost every year and by 1971, over 100,000 buses had been manufactured.

The Ikarus 280 model still runs in Budapest.

The Ikarus 280 model still runs in Budapest.

By 1975, Hungary’s Ikarus was the world’s fourth largest bus manufacturer. Only Mercedes-Benz, LIAZ and Toyota were larger than Ikarus. In 1976, Ikarus received another major boost. The German Democratic Republic folded its own bus manufacturing sector and decided to only purchase Ikarus. The Hungarian firm set up a factory in the GDR to meet the growing demand.

The fall of the one party state and the Eastern Bloc in 1989/90 began a period of rapid decline for Ikarus. In the early nineties, production fell to one tenth of what it was during the early eighties–the company’s golden years. The reunification of Germany also ended the company’s presence in the East German market. By 1994, Ikarus was only able to sell 1,574 buses and two years later–at the time of privatization–had a 13 billion forint debt. During the late nineties, Gábor Széles–today one of the wealthiest businessmen close to Viktor Orbán–tried to find new markets for Ikarus in Central Asia and in the Commonwealth of Independent States, but these efforts largely failed. Part of the reason had to do with the economic crisis in Russia. In 1999, a French consortium bought up one of the main Ikarus factories in Hungary, but this resulted in the eventual closure of both the Budapest and Győr plants, as well as massive cutbacks.

In 2006, Mr. Széles–already then close to Mr Orbán and also at the start of building a right-wing media empire–bought 100% of the Ikarus shares held by the French, through a Hungarian consortium. Initial grand plans led to the closure of the last functioning Ikarus plant, in the town of Egyed, in 2007 and the last bus was manufactured in December of that year.

A new Ikarus bus prototype from 2006, presented to representatives of the media. Photo: Péter Istvánfi / iho.hu

A new Ikarus bus prototype from 2006, presented to representatives of the media. Photo: Péter Istvánfi / iho.hu

In 2010, there were once again plans to revive Ikarus, as a joint venture between two companies: Ikarusbus Kft and Rába Nyrt. They were hoping to supply buses on some of the intercity routes in Hungary operated by the Volán coach service. This venture led to little success, although a partnership with the Czech Republic’s Skoda allowed the consortium to win a tender announced by the town of Szeged, providing the city with 13 trolleybuses. Eventually, a consortium of fledgling and would-be bus manufacturers cut ties with Mr. Széles and attempted to forge ahead with a new strategy to revive bus manufacturing in Hungary.

This brings us to the current opportunity in Budapest. The Hungarian capital must purchase 150 buses to transport passengers along the M3 line, during the two year refurbishment and upgrade of the metro. The first tender, announced in the fall of 2015, was for the purchase of 75 assembled buses and 75 buses that the Budapest Transportation Company (BKV Zrt.) would assemble. Poland’s Solaris put in the best and preferred offer, but they were competing with a Hungarian bidder called MABI-BUS Ltd.

The municipal leadership in Budapest clearly prefers the Solaris option, as the Polish company is about to embark on a design change and is able to offer the already manufactured older model at a heavily discounted price. In fact, Solaris is about 20% cheaper than what the Hungarian MABI-BUS Ltd. has to offer. Another major advantage is that Solaris buses are ready and can be shipped to Hungary in little time, while MABI-BUS vehicles are still in production. Time is of the essence, the M3 line is in dismal shape and Solaris offered Budapest a good deal. So why is MABI-BUS still being considered?

The reason is not too surprising for those who observe Hungarian politics. The Orbán government prefers the Hungarian bidder. Mihály Varga, for instance, has been a strong supporter of what MABI has to offer, especially the company’s focus on electric buses. Additionally, the hvg.hu website points out that a company called Evopro may be behind the MABI-BUS effort and it is widely assumed that Evopro is affiliated with Tamás Szemerey, who is none other than the cousin of the current governor of the Central Bank of Hungary, György Matolcsy. The governor remains mired in controversy for transferring large amounts of money from the Central Bank to companies affiliated with his cousin.

What the government seems to prefer is for BKV Zrt to enter into bus service agreements with Hungarian firms tied to people close to Fidesz. The official line, of course, is different. The Orbán government emphasizes that it is both national strategy and policy to revive bus manufacturing in Hungary. And it sees the Budapest metro tender as a prime opportunity, considering the large demand for new buses.

Yet the question remains: is the government putting lives at risk in Budapest, by slowing down the M3 upgrade, in order to help give a much needed boost to a struggling industry or perhaps to hand a major business opportunity over to oligarchs and businessmen close to Fidesz?

2 Comments

  1. András B. Göllner says:

    I think MABI – BUS Kft should be renamed as the Maybe Bus Company (MBC), and Budapest renamed as the Maybe Bus Capital of the world. Their joint logo should be a Turul in full flight over the capital (“Our buses will give you wings”).

  2. György Lázár says:

    Excellent article! I also want to mention NABI (North-American Bus Industries) which was another Ikarus revival attempt here in the US. They manufactured at Kaposvár, Hungary and assembled at Anniston, Alabama. Still around as a Canadian company, part of Winnipeg based New Flyer!

    I actually agree with the Orbán Government that state support is needed to revive bus manufacturing in Hungary, but I have a feeling that after decades of mismanagement and corruption it will be almost impossible. They missed the boat… or rather… the bus.

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