Brussels, 8 September 2014
State aid: Commission endorses investment aid to Apollo Hungary for production of tyres in Gyöngyöshalász
The European Commission has found that regional investment aid totalling €95.7 million (approximately HUF 29 billion) to Apollo Tyres (Hungary) Kft. for the construction of a tyre plant in Gyöngyöshalász (Northern Hungary) is in line with EU state aid rules. The Commission found that the aid granted by Hungary favours regional development while any distortions of competition will remain limited.
“Apollo Hungary's investment project is expected to create 975 new jobs in Gyöngyöshalász. It will contribute significantly to the development of the region without unduly distorting competition in the Single Market" said Commission Vice President in charge of competition policy Joaquín Almunia.
In June 2014, Hungary notified plans to support the construction of a new tyre plant with a direct grant of €48.2 million, an employment grant of €2.8 million and tax allowances of around €44.7 million. The project involves investments of €442.2 million and is expected to create over 975 now jobs. It is to be carried out in Gyöngyöshalász in the Észak-Magyaroszág region, an area with high unemployment and a GDP well below EU average, eligible for regional aid under Article 107(3)(a) of the Treaty on the functioning of the European Union (TFEU). The state aid is granted in the framework of existing aid schemes but had to be notified to the Commission for individual assessment and clearance because of the high aid amount that carries a higher risk of distorting competition.
The Commission assessed the project under the applicable regional aid guidelines 2007-2013 (see IP/05/1653), and in particular the rules on large investment projects.
The Commission's investigation found that the market shares of Apollo Tyres Ltd., Apollo Hungary's parent company, for passenger car tyres, light truck tyres and tyres for trucks and buses in the European Economic Area (EEA) will stay below 25% after the investment. Moreover, the production capacity created by the investment remains below 5% of the market. The Commission therefore concluded that the measure's positive contribution to regional development would outweigh the distortion of competition created by the state aid.
Under the applicable EU Regional Aid Guidelines (see IP/05/1653), the Commission may approve large investment projects during the preliminary examination phase, only if the beneficiary's market share and the capacity increase created by the investment do not exceed certain thresholds. This is because such projects might distort competition more than smaller ones and the Commission needs to verify on a case-by-case basis, whether they really need state aid to go ahead.
If the Commission finds that these thresholds are exceeded, it has to carry out an in-depth investigation on the basis of the method laid down in its Communication on the assessment of regional aid for large investment projects (see IP/09/993). This assessment verifies, in a first step, whether the aid is necessary to attract the investment into the region. In the affirmative, the Commission assesses in a second step whether the overall benefits for regional development outweigh the distortion of competition and trade between Member States brought about by the public intervention.
Apollo Hungary belongs to Apollo Tyres (Greenfield) Cooperatief U.A., which in turn is a 100% subsidiary of Apollo Tyres Ltd., an Indian publicly listed company. Apollo Hungary is building a new tyre plant in Gyöngyöshalász. The new tyres to be produced are passenger car tyres ranging from all season tyres, summer tyres to winter tyres, as well as light truck tyres, and tyres for truck and bus applications.
The non-confidential version of the decision will be made available under the case number SA.38986 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.