Prof. László Palkovics: “We want to be a hub for innovation”

Hungary is positioning itself for the automotive future. Prof. László Palkovics, where he is responsible for research and the universities and has previously worked for Knorr Bremse for a long time for R & D, in an interview about the role the country intends to play in international automobile production in the future.

How is Hungary positioning itself in the global automotive industry?

It is good to know a bit about the industrial history of Hungary. We’ve always had a relatively strong auto industry, and at Comecon we had the job of making buses and trucks. Icarus buses were our flagship. This well-functioning industry virtually collapsed in the 1990s. But on their ruins a new car industry emerged. At the beginning of the 1990s, many companies – mainly German but not only German – came to Hungary to start production. There were many workers with simple but good training. There was a positive investment environment. But that was also the case in the other countries of the V4 group.

We saw the multinational companies go to China and come back and said they could optimize the whole supply chain in Central and Eastern Europe much better than in China, so expand production here. Result of this development: These V4 countries today have a well-functioning multinational, but no local auto industry. Suppliers to the V4 countries tend to be small and medium-sized businesses that have a strong focus on multinationals as customers. The prices are ok, the quality is also very good, the logistics works without problems. The local companies, mostly in the first generation, do so for their customers, but largely without their own Intellectual Properties. Having no own products makes you dependent.

What was very positive, however, is that from the mid-90s more and more companies started to build up research and development in Hungary. I was lucky enough to be part of this process not only for my employer, 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, Audi started to build up a high quality development in Hungary. It was about not staying at this extended workbench any more, but also building up high-quality activities like in Stuttgart or Munich. That’s how we’re building a new position in the global automotive industry in manufacturing, from OEMs to different tier levels. Hungary wants to be an innovation hub for the automotive industry. We have all the skills in the country for that.

Now there are noticeable upheavals in the automotive industry with electromobility, autonomous driving, networking of vehicles, Industry 4.0 – how is Hungary positioning itself in these fields?

We are not at all behind in this development, but at the forefront. And that has tradition. I remember Professor Michelberger, the former chief designer at Ikarus. As an engineer, he had inspired Hungarian vehicle production for many years, and as early as the mid-eighties he felt that next to the buses, the next trend could be anticipated – namely, the electronics in the car, ie controllable systems such as the suspension, the brake or the four-wheel steering , He drove the academic environment in Hungary, the universities and research institutes, so we position ourselves here. The first article about an active suspension was written in ’84. At that time I was still a student at the university and also wrote my dissertation on active and semi-active suspension. We continued that and the first idea came for ESP. Colleagues from German Chairs who came here around 1994 said talking about ESP in Hungary is like carrying water into the sea. We also had patents, which not everybody believed except the people of Knorr Bremse, who then decided to start building here from ’94. Today they have over 500 engineers in Hungary. ThyssenKrupp also employs nearly 1,000 engineers for electric power steering and autonomous vehicles. That’s a strong development here.

If a big Swabian manufacturer has to decide today if he should start a project for autonomous vehicles in Palo Alto or in Stuttgart or in Budapest, he can decide with good reason for Budapest. We also contributed our expertise in automated vehicles to projects in San Diego, California. Of course, we must not stay with our previous results, but must continue to evolve. That’s why we started research projects and training programs with master’s degrees in English on autonomous driving.

On Entrepreneurship: What role do start-ups play as a bridge from university to industrial practice?

That’s not strong in Hungary yet. And that’s because the Hungarian industrial development has been geared towards multinationals. Working for a multinational company, either as an employee or as a small supplier, is still safer than starting your own business. Students at the university say to themselves: “I can work at Bosch or Continental in Hungary and provide high-quality engineering work, so why should I take a risk with my own company?” So the scene was very weak so far. But now comes a new generation, with a different mentality. I looked at Israel, which has a similar size and structure to Hungary. Israel has none of these very typical large multinational investors, but relies on its own companies. I wanted to understand why they are so successful. That’s a mentality issue. If only 20 out of 100 start-ups stay in Israel, that’s a success, even if 80 are sold or sold. They are not afraid to finance such a thing as a state or university. We are now promoting this startup mentality in Hungary in all of our new research or university programs. At the University of Szeged we finance start-ups by computer scientists. And if something goes wrong there is still a positive learning effect. We are now promoting this startup mentality in Hungary in all of our new research or university programs. At the University of Szeged we finance start-ups by computer scientists. And if something goes wrong there is still a positive learning effect. We are now promoting this startup mentality in Hungary in all of our new research or university programs. At the University of Szeged we finance start-ups by computer scientists. And if something goes wrong there is still a positive learning effect.

Despite all this, we could be a bit faster. If you look at our neighbor Slovenia, a smaller country with 2 million inhabitants and very few multinationals. There, the clusters of small and medium-sized companies in the automotive industry are strong, they have their own products.

Will Hungary also be attractive for small and medium-sized enterprises and even start-ups from Germany, who are looking for all resources and people?

Yes absolutely. I think the car world will not look like it is today in 10 years. The vehicle itself will probably be less important than the whole organization, the network of vehicles. How we use our cars will be the central question. I think in this area smaller companies are much faster and have better chances than the big ones. Horvath & Partner have told me how to do data-based evaluations for a major automaker in Germany. There are new business models that can be better adopted by small companies. I already see opportunities.

Labor market, wage development and practice-oriented education in Hungary. What developments do you see here?

It’s just that wages are rising. If efficiency rises faster than wages, that’s okay. But wages must rise as well. In Central Europe, Hungarian average wages are the lowest and Hungarian labor is not less efficient. For companies, the investment is nothing unusual.

This also applies to the relationship between industry and universities. Was not it the same in Germany in the 70s? At that time, the companies complained that the theory was good at the universities, but lacked practical orientation. They started investing and collaborating with the universities. It came to solutions such as the dual universities in Baden-Württemberg. What the German companies have come up with, they have brought in the universities. Exactly that happens now in Hungary. Since 2014 we also have the dual universities and cooperate with Baden-Württemberg. Daimler brought this culture to Kecskemet. There we have set up the first pilot project, which is now being extended to the country. After only two years we have more than 1000 students in the dual training, over 600 companies are engaged there, that works very well. The companies have to do a lot here, of course, but they do. Yesterday in Szombathely, there is also a very strong automotive industry represented with Opel, LuK and others. There, three years ago, we launched a new degree program for mechanical engineers. This works great when the companies, the local society, the government and the universities do it together.

Topic Brain Drain: Universities maintain and enhance the high quality of education, graduates are in demand on every job market in the world, not only in Hungary …

There is no uniform picture. If the conditions are financially correct, further development is possible and the working environment is positive, Hungarian engineers will not go to Germany or abroad. Take Knorr-Bremse. The fluctuation in development is very small. Until three years ago, the fluctuation was two to three percent and this fluctuation remained within the company and in the direction of the locations Germany, America or India. Of course, the Hungarian society invests in this kind of education, ie in the doctor’s education, dentist training or engineering education. Here students study for free, which is financed by taxes. Anyone who has been financed by society should also give something back to them.

Hans Gäng
14.11.2019
von Hans Gäng