From billion-dollar failures in the automotive industry to the legal regulation of artificial intelligence — at a sectional event of the HEA, three CEOs presented the darker side of innovation.
Innovation is usually a celebrated concept: companies are expected to pursue it, governments support it, and it is tracked among key success indicators. At the most recent event of the Innovation Section of the HEA, however, an unusual question took center stage: is every innovation good, and for whom does it create value? Following the introductory remarks of Prof. Dr. Magdolna Csath, three industry leaders — Csaba Svéhlik, automotive expert; Csaba Ilcsik (CEO of Waterscope Ltd.); and Attila Simon (CEO of Herend Porcelain Manufactory Ltd.) — shared their experiences on the fine line between beneficial and harmful innovation.
The automotive industry: where billions go to waste
Csaba Svéhlik, an award-winning automotive engineer and recognized researcher of the Hungarian Academy of Sciences, opened with striking figures: the global annual revenue of the automotive industry amounts to $3 trillion, and it accounts for 34% of the EU’s R&D spending — €84.6 billion — far surpassing the pharmaceutical industry. For comparison, Hungary’s entire annual GDP is around $250 billion.
However, this does not guarantee success. The speaker listed several spectacular market failures: the Renault Vel Satis generated €1.2 billion in losses, the Audi A2 €1.33 billion, and the Fiat Stilo over €2 billion. The record is held by the Smart ForTwo — Mercedes burned €3.35 billion on that model. Insufficient market knowledge and misreading consumer demand are among the most serious innovation mistakes, Svéhlik concluded.
He also devoted a separate section to the risks of politically driven innovation. In his view, the EU’s requirement for a full transition to electric vehicles by 2035 is forcing an unprepared sector into a rapid shift. China increasingly dominates the supply of rare earth metals (lithium, cobalt) required for battery production, while mining has severe ecological and humanitarian consequences: in South America, entire indigenous settlements are being destroyed for lithium extraction. Moreover, battery recycling remains unresolved, and even industry professionals do not consider this technology a final solution.
Paradoxes of the environmental sector: when innovation undermines itself
Csaba Ilcsik, CEO of Waterscope Ltd., which deals with water and wastewater treatment and energy use, introduced his thoughts with a striking analogy: “Cars need brakes so they can go faster.” Environmental protection is exactly such a brake — it helps us become more efficient and better.
The speaker also critically addressed the empty rhetoric surrounding sustainability. He pointed out that expanding solar energy production does not in itself increase efficiency — devices consume the same amount of energy, only now from a green source. Moreover, solar panel production requires significant water resources, they are difficult to recycle, and they overload the grid: during long Easter weekends, production shutdowns and reduced household consumption nearly cause blackouts — as actually happened in Spain last summer.
Ilcsik also painted a sharp picture of the limits of innovation adoption. A water utility does not employ innovators — innovations must be sold, but first users must be taught how to use the opportunities they offer. In his philosophical closing thought: no matter how advanced automation and artificial intelligence become, there will always be a need for people who do the work with their own hands.
Law and artificial intelligence: who is responsible when the algorithm decides?
Attila Simon, CEO of Herend Porcelain Manufactory and Vice President of the Hungarian Chamber of Commerce and Industry, approached the challenges of artificial intelligence from a legal perspective. He used a thought-provoking analogy: if a more intelligent entity than us (an AI system) does not share certain information with us — just as we do not share all decisions with our pets — it poses serious risks.
The issue of liability in self-driving cars (who is responsible in case of an accident: the manufacturer, the software developer, the distributor?), the conflict between facial recognition systems and privacy, and the discrimination risks embedded in algorithmic credit scoring — all represent areas where the legal system has yet to provide satisfactory answers.
The European Union’s AI regulation defines four risk categories (minimal, limited, high, and unacceptable risk) and establishes principles such as transparency, non-discrimination, and maintaining human oversight. However, according to Simon, these are currently only principles — the creation of truly applicable legal norms still lies ahead and will require broad social consensus.
ESG, competitive disadvantage, and quality as a long-term strategy
One of the liveliest parts of the discussion revolved around ESG regulation. All three speakers agreed that EU sustainability requirements currently place European companies at a competitive disadvantage compared to China and the United States, where such administrative burdens are not imposed. Ilcsik pointed out that in Asia, groundwater levels have dropped by 50 meters over the past twenty years because companies extract resources without restrictions.
At the same time, participants expressed optimism about the long-term competitive power of quality. European consumers — especially in the food and industrial sectors — are increasingly willing to pay higher prices for verified quality. A telling example: even in China, those who can afford it tend to buy European products. The transition toward knowledge-based economies in developed countries also points toward European innovation and expertise.
Conclusion
The core message of the event was not to reject innovation, but to approach it critically. As Prof. Dr. Magdolna Csath summarized: innovation in itself does not guarantee clearly positive outcomes — ethical considerations, real market demand, and long-term social value creation are also necessary. Failed innovations and poor decisions are part of the process — but the goal is to consciously reduce them and avoid sacrificing nature, society, or employee motivation in the process.
This summary was prepared with the assistance of the artificial intelligence applications stt.ai and claude.ai.