European Union state aid regulators have opened an investigation into Slovakia's plan to grant EUR125m to Tata subsidiary Jaguar Land Rover (JLR) to support a new plant in the country.
Margrethe Vestager, EU competition commissioner said in a statement: "It is a good thing if public investment fosters economic growth in Member States. However, we need to avoid harmful subsidy races between Member States. The Commission will carefully investigate if Slovakia's planned support is really necessary for Jaguar Land Rover to locate its investment in Nitra and is kept to the minimum needed, if it distorts competition or harms cohesion in the EU".
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Jaguar Land Rover is investing EUR1.4bn in a car manufacturing facility in the region of Nitra (Slovakia), an area eligible for regional aid under EU state aid rules. The plant would have a production capacity of 150,000 cars per year. In May 2016, Slovakia notified the Commission of its plans to grant EUR125m of public support for the project, representing the maximum aid that can be granted for such a project.
The Nitra plant will manufacture a range of new aluminium Jaguar Land Rover vehicles. The first cars are expected off the line late in 2018.
EU state aid rules, in particular the Commission's 2014 Regional State Aid Guidelines, enable Member States to support economic development and employment in the EU's less developed regions and to foster regional cohesion in the Single Market. The Commission says that in order to be approved, the measures need to fulfil certain conditions to make sure that they have the intended positive effect. This includes that the support must incentivise private investment, be kept to a minimum necessary and must not lure away investment from a region in another Member State, which is as or less economically developed ("anti-cohesion effect").
The Commission said it "has doubts at this stage that the planned aid support of EUR125m in Nitra measure complies with all criteria of the Regional Aid Guidelines".
In particular, "the Commission has doubts at this stage whether the measure incentivises private investment. It will need to further investigate whether Jaguar Land Rover's investment decision was triggered by considerations other than the conditional public subsidy of EUR125m".
Slovakia claims that without the aid the investment would have taken place outside the European Union, in Mexico. However, the Commission "will have to investigate further indications that the €125 million subsidy incentivised Jaguar Land Rover to invest in Slovakia rather than in another Member State. If proven, the measure may have an anti-cohesion effect in the EU, which would not be permitted under the Guidelines".
The Commission also said it has "doubts at this stage whether additional measures planned by Slovakia are free from state aid. In particular, Slovakia will transfer to Jaguar Land Rover land for the new car plant from a large industrial estate under development and has granted an exemption from a fee payable under Slovakian law when converting agricultural land into industrial land. Should these additional measures turn out to qualify as state aid in favour of Jaguar Land Rover, the total aid amount would exceed the maximum that can be granted for this investment project in Nitra under the Regional Aid Guidelines."
The Commission said it will now investigate further to determine whether or not these initial concerns are confirmed.
