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European Commission

Press release

Brussels, 1 October 2014

State aid: Commission opens in-depth investigation into proposed public financing for Volkswagen in Portugal

The European Commission has opened an in-depth investigation to examine whether Portugal's plans to grant €36.15 million public financing to Volkswagen Autoeuropa, a subsidiary of the Volkswagen group, for an investment project in the Setubal region are in line with EU state aid rules. The opening of a formal investigation gives interested third parties the possibility to comment on the proposed measure. It does not prejudge the outcome of the investigation.

Commission Vice-President in charge of competition policy Joaquín Almunia said: "The Commission welcomes aid to encourage investment projects in disadvantaged regions. However, we need to verify that the contribution of taxpayers is reduced to the minimum necessary to make the investment happen and remedy a market failure. We also need to be particularly vigilant regarding state aid to sectors facing overcapacity or other structural problems, as such aid could significantly distort competition in the Single Market."

In June 2014 Portugal notified plans to support the introduction of a new car production technology called “Modularer Querbaukasten” by Volkswagen Autoeuropa, a subsidiary of the Volkswagen Group, at its existing factory in Palmela. This new production technology is aimed at increasing flexibility in the production of passenger car models. Palmela is located in the Peninsula de Setubal region, an area with high unemployment and a low level of GDP per capita, eligible for regional aid under Article 107(3)(c) of the Treaty on the Functioning of the European Union (TFEU) according to the Portuguese regional aid map applicable for the period 2007–2014 (IP/07/153). The overall investment costs are estimated at around €672 million.

The applicable EU Regional Aid Guidelines for the period 2007-2013 allow Member States to support investment projects in disadvantaged regions if certain criteria are met (see IP/05/1653). Aid for large investment projects exceeding certain amounts have to be notified individually because they carry a greater risk of distorting competition than smaller projects. Where such large aid amounts benefit a company with a market share exceeding 25% or concern an investment that leads to a substantial capacity increase on a market in decline, the Commission has to carry out a detailed verification of the aid.

The Commission's preliminary investigation revealed that the market share of Volkswagen exceeds 25 %. In such circumstances the Commission needs to investigate. Moreover, the Commission has concerns that the aid intensity (i.e. the proportion of the aid relative to eligible investment costs) may be higher than permitted under the guidelines. The Commission will now investigate to verify whether these concerns are confirmed.

Background

In June 2013, the Commission adopted revised regional aid guidelines (see IP/13/569). The guidelines entered into force on 1 July 2014 and apply to regional aid intended to be awarded after that date.

The Commission adopted decisions on the compatibility with EU state aid rules of four distinct projects by Germany, Hungary and Spain to grant regional aid in favour of the car manufacturers Volkswagen, BMW and Ford, in order to attract major investment projects in July this year (see IP/14/792).

See also policy brief on state aid control in the automotive sector:

http://ec.europa.eu/competition/publications/cpb/2014/012_en.pdf.

The non-confidential version of the decision will be made available under the case number SA.38831 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.

Contacts:

Antoine Colombani (+32 229 74513, Twitter: @ECspokesAntoine)


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