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(Bloomberg) -- Chinese electric vehicle maker BYD Co. is facing scrutiny from at least three members of the European Parliament over alleged labor abuses at its new factory in Hungary, a project central to its aggressive expansion into the European market. The inquiry follows a report detailing exploitative working conditions, including 12-hour shifts seven days a week, and links one of its contractors to a previous labor scandal in Brazil.
“They weren't letting workers leave,” Qiang Li, founder of the New York-based watchdog China Labor Watch (CLW), said in translated remarks to CNBC, explaining that managers were rushing to meet a January 2026 production deadline. CLW’s investigation, which involved interviews with 50 workers, prompted the EU lawmakers to formally question the European Commission.
The allegations, detailed in a CLW report published April 14, claim that contractors building BYD's plant in Szeged, Hungary, forced thousands of migrant workers to work without rest days in violation of Hungarian labor law. The report alleges that workers’ wages were withheld, and emergency services were called to the site 12 times since February 1, resulting in one confirmed death.
This scrutiny comes at a critical time for BYD, which surpassed Tesla Inc. as the world’s largest EV maker in 2025 and aims to sell over one million cars outside China this year. The allegations pose a significant reputational risk that could undermine its European strategy, which already faces headwinds from a 17 percent EU countervailing duty on its imports.
The controversy is amplified by the involvement of a contractor with a history of labor violations. The CLW report identified AIM Construction Hungary, a subsidiary of China's Jinjiang Construction Group, as one of the contractors on site. Another Jinjiang subsidiary was at the center of a 2024 scandal in Brazil, where authorities said investigations uncovered conditions "analogous to slavery" at a BYD factory construction site, leading to the rescue of 163 Chinese workers.
BYD had claimed in December 2024 that it had cut ties with the Jinjiang entity in Brazil. However, the CLW report indicates BYD engaged another subsidiary of the same parent company for its crucial European factory, which is slated to produce 300,000 vehicles annually.
According to the CLW investigation, contractors used financial leverage to prevent workers from leaving. Tactics included withholding wages until contracts were fulfilled, charging exorbitant recruitment fees that created debt bondage, and failing to provide proper work visas and medical insurance. One worker reportedly died during a crane operation in February, and CLW founder Qiang Li suggested more deaths may have occurred.
Workers were allegedly instructed to lie to labor inspectors, telling them they worked only eight-hour days, five days a week. Their actual conditions directly violated Hungary's Labor Code, which limits work to 48 hours per week. CLW stated these practices resemble the International Labor Organization's definition of forced labor.
The allegations have already caused political reverberations. In Canada, the Canadian Vehicle Manufacturers’ Association, which represents Ford and General Motors, cited the report as a reason to oppose BYD's entry into the Canadian market. “Canada’s auto industry is capable of competing and winning—but only if the playing field is fair,” said association president Brian Kingston.
The situation mirrors earlier political fallout in Brazil, where a government official who added BYD to a blacklist restricting its access to loans was subsequently removed from his post. The case highlights the complex challenges Western governments face as they try to balance competition with Chinese firms against concerns over labor practices and state subsidies, which totaled 12.5 billion yuan ($1.7 billion) for BYD in 2025.
This article is for informational purposes only and does not constitute investment advice.
