The European Commission on Tuesday said it was investigating whether EUR96m in French aid to PSA Peugeot Citroen for the development of a diesel hybrid car broke EU state aid rules.

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“We have to ensure that the aid is not spent on research and development that would have been carried out by Peugeot Citroen in any event or which its competitors may carry out without state aid,” competition commissioner Neelie Kroes told Reuters.


A PSA spokesman told the news agency his group had “learned with astonishment” of the decision. He said the French aid to a consortium of PSA and other European firms and institutions had been decided by the French industrial innovation agency (A2i) following its normal procedure and notified to the EU.


The commission reportedly said research and development was important for Europe as it contributed to growth and that state-aided R&D could create important incentives.


“However, the commission has doubts whether Peugeot Citroen and its partners really need this aid to produce less-polluting cars,” the EU executive said in a statement cited by Reuters.

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“The automobile sector is one of the most R&D-intensive in the European economy and similar pro-environment projects have been announced by competitors,” it reportedly said.


The commission also said it was keen to hear industry views on the questions it raised through the inquiry, Reuters noted.


PSA was reported to have said there was a difference between the timetables needed for the research and that for European public decision-making.


“PSA remains convinced that the diesel hybrid is a good solution to reduce CO2 emissions, another goal of the EU, but will now with the consortium study the impact of the new delay and the economic model of the project,” the spokesman told the news agency.


The total R&D cost of the hybrid project is EUR470m, Reuters added.