The European Commission has opened an in-depth investigation to assess whether public support that Hungary plans to grant for the construction of a new automotive components plant in Észak Magyarország is in line with EU State aid rules. The beneficiary of the measure would be Rubin NewCo Kft.
The Commission’s investigation
In 2021, Hungary notified the Commission of its plans to grant Rubin NewCo Kft €43.76 million of public support for the construction of a new automotive components plant in the northern Hungary region of Észak Magyarország.
The new plant will take over the capacity of two other European production sites belonging to the group. The plant is expected to create approximately 1,500 jobs in Northern Hungary, a less advantaged region eligible for regional aid under EU State aid rules.
Hungary plans to support the construction of the new automotive components plant through: (i) a direct grant of €43.01 million, and (ii) a tax benefit of €0.75 million. The total aid amount that the Hungarian authorities plan to grant, expressed as a percentage of eligible investment costs, is 31.76%, which is below the maximum amount of aid allowed for such a project (i.e. 31.88%).
At this stage, based on its preliminary assessment, the Commission has found that the investment project facilitates the economic development and employment in a less advantaged region of the EU. Nevertheless, the Commission has doubts on whether the measure is in line with EU State aid rules, in particular the Guidelines on Regional State aid.
In particular, the Commission has decided to open an in-depth investigation to assess whether:
- the aid is proportionate, meaning that it is limited to what is necessary to attract the investment to the disadvantaged region;
- the measure has an “incentive effect”. In this respect, the Commission will investigate whether the decision to set up the new plant in Hungary was directly triggered by the Hungarian public support or whether it would have been carried out in that area even without public support. The Hungarian authorities claim that, without the aid, the investment would have taken place outside the EU, namely in Türkiye; and
- the aid has no undue negative effects on competition and trade within the EU.
The Commission will now investigate further to determine whether or not these initial concerns are confirmed. The opening of an in-depth investigation gives Hungary and interested parties an opportunity to submit comments. It does not prejudge in any way the outcome of the investigation.
EU State aid rules, in particular the Commission’s Regional State Aid Guidelines (‘RAG’), enable Member States to support the economic development and employment in the EU’s less developed regions and to foster regional cohesion in the Single Market. The RAG set out the rules under which Member States can grant State aid to companies to support investments in new production facilities in the less advantaged regions of Europe.
In order to comply with the RAG, an aid measure must respect a number of conditions:
- The aid must have a real “incentive effect”, in other words, it must effectively encourage the beneficiary to invest in a specific region;
- the aid must not exceed the regional aid ceiling applicable to the region in question and must be kept to the minimum necessary to attract the investment to the disadvantaged region;
- the aid must not have undue negative effects, such as the creation of excess capacity in a declining market;
- the aid must not directly cause the relocation of existing or closed down activities from elsewhere in the EU to the aided establishment; and
- the aid must not divert investment away from another region in the EU, which is as or more economically disadvantaged than the region where the aided investment takes place.
The non-confidential version of the decision will be made available under the case number SA.63470 in the State Aid Register on the 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.
Source – EU Commission