The European Commission has authorised regional investment aid of 22 million euros for the production of the diesel and gasoline engines at the Renault plant in Valladolid (Spain). The Commission said in a statement that after conducting the formal investigation procedure opened in November 2001, it is now satisfied that the rules of the Community framework for State aid to the motor vehicle industry have been respected.

The recipient of the proposed aid is Renault España SA and the aid will help the company's plant in Valladolid increase its productive capacity by 1,200 engines/day.

The project involves total investment of 149 million euros between 1999 and 2004 and the notified aid takes the form of a regional grant of 22 million euros.

The Valladolid region is recognised by the Commission as a regionally assisted area in the sense of Article 87(3)(a) EC under the Regional Aid map for the period 2000-2006, with a regional aid ceiling of 35 % net grant equivalent (NGE).

In investigations of this type, the Commission seeks to ensure that any aid granted in the automobile sector is both proportional to the gravity of the problems it intends to solve and necessary for the realisation of the project.

The aid recipient must prove that it has an economically viable alternative location for its project. The Commission determined that the Renault group's Bursa plant in Turkey could have hosted the project, and therefore that Renault has had the choice to carry out the investment at this alternative site.

To assess the proportionality of the aid, a "cost-benefit analysis" was carried out with a site within the EEA and CEECs. The site of Mioveni, Romania, where Renault owns the Dacia plant, was chosen for its similarities with Bursa with regard to location and costs. The cost-benefit analysis compares the costs, which an investor would bear in order to carry out the project in the chosen location, with the costs for an identical project in an alternative location.

The cost benefit analysis showed that the extra costs for locating the production in Valladolid rather than in Mioveni are higher than the aid that has been proposed for the project. Therefore, the Commission concluded that the rules of the Community framework for state aid to the motor vehicle industry have been respected.