July 22 (Reuters) - China's BYD will delay mass production at its new electric vehicle plant in Hungary until 2026 and will operate the plant below capacity for at least the first two years, two people familiar with the matter said.

Meanwhile, a source said that China's No. 1 automaker will start production earlier than expected at a new plant in Turkey, where labor costs are lower, and will significantly exceed announced production plans.

Shifting production from Hungary to Turkey would be a setback for the EU, which had hoped that tariffs on Chinese-made electric cars would attract Chinese investment and well-paying manufacturing jobs.

BYD's €4 billion ($4.64 billion) plant in Szeged, southern Hungary, will start mass production in 2026, but will only produce tens of thousands of cars during the entire year, the sources said.

This represents a small portion of the plant's initial production capacity of 150,000 vehicles per year. The plant's maximum production capacity is planned to eventually reach 300,000 vehicles per year.

A third source confirmed a slowdown in the pace of start-up in 2026.

BYD had announced it would begin operations in Szeged in October, but did not specify when mass production would begin. Sources said production in Szeged is scheduled to increase in 2027, but will still fall short of planned capacity.

Meanwhile, a source said that BYD's $1 billion plant in Turkey, which was scheduled to begin production in late 2026 with an annual capacity of 150,000 vehicles, will produce more cars than the plant in Hungary next year.

He added that production at the Manisa plant in western Türkiye will exceed 150,000 vehicles in 2027, and BYD will significantly increase production again in 2028.

BYD did not respond to requests for comment.

The sources spoke on condition of anonymity because they were not authorized to discuss BYD's production plans publicly.

BYD is building the factory in Hungary to sell cars in Europe duty-free. All cars the company currently sells in Europe are made in China and are subject to the European Union's anti-subsidy tariffs on Chinese-made electric vehicle imports, in addition to a 10 percent customs duty. The total duty for BYD vehicles is 27 percent.

(USD = 0.8627 EUR)

(Prepared by Amira Zahran for the Arabic edition - Edited by Mahmoud Salama)