In June 2026, Chinese electric-vehicle manufacturer BYD confirmed that its planned $1 billion electric and plug-in hybrid vehicle factory in Manisa, western Turkiye, had been placed on indefinite hold. The project, signed with great ceremony in July 2024 in the presence of Turkish President Recep Tayyip Erdo?an, had been presented as a landmark investment. It promised annual production capacity of 150,000 vehicles, up to 5,000 jobs, a research and development center, and production by the end of 2026. Nearly two years later, construction had not begun and no foundation had been laid. BYD Executive Vice President Stella Li said the Turkish project had no timeline and that the company’s priority was its facility in Szeged, Hungary.

The decision left Ankara politically exposed. Turkiye had granted BYD substantial import-tax exemptions, allowing the company to sell tens of thousands of vehicles and generate hundreds of millions of dollars in additional profits.

Following the setback, Beijing intensified its media and diplomatic outreach in Turkiye to repair China’s damaged image and protect the broader bilateral relationship.

The Collapse of the Manisa Project

The Manisa investment was conceived as a mutually beneficial arrangement. For Turkiye, it offered an opportunity to become a regional electric-vehicle manufacturing hub and attract the first major new foreign automotive brand since the late 1990s. For BYD, it provided a potential production base that could take advantage of Turkiye’s Customs Union with the European Union and soften the impact of higher EU tariffs on Chinese-made electric vehicles. The factory was therefore more than a standalone industrial project: it was expected to anchor a wider supply chain, strengthen Turkiye’s export position, and demonstrate Ankara’s ability to attract high-value Chinese manufacturing. In practice, however, the arrangement unraveled. 

By early 2026, Turkish authorities had suspended the tax exemptions granted to BYD because of the lack of progress. Ministry of Industry and Technology officials maintained that the investment agreement, including its conditions, obligations, and guarantees, remained legally valid. They also warned that BYD could be required to repay the incentives if it failed to complete the project.

Parliamentary scrutiny intensified, with opposition lawmakers emphasizing that “not a single shovel had hit the ground.” Stalled construction, suspended fiscal benefits, and mounting political embarrassment effectively froze the project. That mismatch turned an industrial promise into a politically sensitive test of credibility.

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Why the Turkish Project Failed

The failure reflected a combination of commercial, regulatory, economic, and political factors. Commercially, BYD’s strategy shifted decisively toward manufacturing inside the European Union. EU tariffs on Chinese electric vehicles made vehicles assembled in Turkiye less competitive in the European market than those manufactured within the bloc. Although Turkiye’s Customs Union provides important advantages, it does not offer the same status or protection from tariffs as production inside an EU member state. Li made BYD’s priorities explicit in June 2026: Hungary came first, a second European facility ranked next, and Turkiye had no schedule.

Incentive-related disputes accelerated the breakdown. The Turkish government had suspended its additional 40 percent tariff on Chinese EV imports for BYD as an inducement linked to the company’s factory commitment. When the investment failed to materialize, those privileges were withdrawn at the beginning of 2026. The subsequent decline in BYD’s Turkish sales further weakened the commercial case for maintaining a large presence without local production. Analysts estimated that tax-advantaged imports generated an additional $500 million to $1 billion in profits for BYD. That short-term windfall, however, could not overcome the longer-term advantages of producing inside the EU once the Hungarian facility became operational.

Political mistrust also contributed. Reports pointed to Chinese caution arising from earlier cases in which Turkiye had reversed major contracts with Chinese companies under external pressure.

Meanwhile, some Turkish officials complained that Chinese negotiators reopened settled terms and made additional demands after agreements appeared final. These competing perceptions of unreliability weakened confidence on both sides. Combined with the stronger tariff and regulatory advantages offered by EU-based production, they made the Manisa project increasingly unattractive under existing conditions.

Beijing’s Image-Repair Campaign

The shelving of the investment damaged China’s standing in Turkiye and generated diplomatic friction at a time when Beijing continued to view Ankara as an important regional partner. Chinese authorities responded with what observers described as a propaganda blitz and charm offensive. The Chinese embassy in Ankara placed unsigned promotional articles in pro-government Turkish media outlets. These pieces highlighted cooperation between the Chinese Communist Party and Turkiye’s ruling Justice and Development Party while promoting the latest volume of Xi Jinping’s The Governance of China.

At the same time, the state-linked Turkey-China Friendship Foundation organized an eight-day, all-expenses-paid trip to Xinjiang for selected Turkish journalists. The resulting reports concentrated on economic development, infrastructure, and counterterrorism, while largely omitting concerns about human rights.

Beijing also expanded its outreach beyond the governing party by cultivating contacts with journalists and opposition figures. Its objective was to contain the reputational damage caused by the BYD episode, prevent the dispute from undermining wider bilateral relations, and preserve Chinese influence in Turkish public discourse.

By addressing both government-aligned and opposition audiences, Beijing appeared to be insulating its relationship with Turkiye from electoral change and growing public skepticism. The campaign demonstrated how a prominent commercial failure can carry broader strategic costs, particularly in a country important to China’s regional connectivity and diplomatic balancing.

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Challenges for BYD in Hungary Under New Leadership

As the Turkish project stalled, BYD’s Hungarian operations advanced. The Szeged plant is scheduled to begin assembling vehicles in the fourth quarter of 2026 and forms the cornerstone of the company’s strategy to manufacture within the EU tariff wall. The previous Orbán government actively courted Chinese investment through infrastructure support, subsidies, tax advantages, and accelerated permitting. Former Foreign Minister Péter Szijjártó played a central role in negotiating the package and later accepted a senior external-relations position at BYD after resigning his parliamentary seat. The appointment immediately prompted allegations of a revolving-door conflict of interest.

Prime Minister Péter Magyar, whose government took office after elections earlier in 2026, ordered a broad review of the subsidies, tax breaks, permits, environmental exemptions, and state commitments associated with BYD’s investment. Officials cited hundreds of billions of forints in public support and infrastructure expenditure. Inspectors examined workers’ documentation at the Szeged site, while police investigated allegations involving the handling of contaminated soil, which BYD denied. The new government also signaled plans to introduce some of the EU’s strictest environmental regulations and reduce the generous tax incentives previously offered to large multinational projects.

These measures create several risks for BYD. A subsidy review and stricter environmental and labor standards could increase operating costs, delay the production ramp-up, or force the company to renegotiate existing terms. Political controversy surrounding Szijjártó’s appointment may restrict informal access to policymakers and intensify parliamentary and public oversight. A broader departure from the previous government’s accommodating approach to Chinese capital could also affect future expansion, additional incentives, and the recruitment of foreign workers.

Although the Magyar government has indicated that existing investments will not necessarily be cancelled, the policy shift has replaced a relatively predictable relationship with greater regulatory uncertainty and political accountability. The Szeged plant remains crucial to BYD’s European strategy, but its expansion can no longer be taken for granted.

Conclusion

The collapse of the Turkish project and growing complications in Hungary show how sensitive major Chinese electric-vehicle investments are to tariff regimes, commercial priorities, and domestic politics. Manisa lost its strategic appeal as BYD prioritized production inside the EU, while incentive disputes and mutual mistrust reinforced the shift. Beijing’s subsequent media campaign sought to limit the diplomatic fallout in Turkiye. In Hungary, production is moving forward, but tighter scrutiny of subsidies, labor practices, environmental compliance, and political relationships could constrain future growth.

BYD’s European success will therefore depend not only on manufacturing capacity but also on its ability to navigate changing political and regulatory conditions in host countries.

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