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State support for Peugeot plant in Spain comes under EU scrutiny

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State support for Peugeot plant in Spain comes under EU scrutiny

PSA Peugeot Citroen - Photo Alejandro Arce Herrero

(BRUSSELS) - The EU Commission opened a probe Monday into whether Spain's granting EUR 20.7m of public support to PSA for investing in its existing car plant in Vigo, Spain is in line with EU rules on regional state aid.

"Public investment is important to foster economic growth in disadvantaged regions in Europe," said Competition Commissioner Margrethe Vestager: "However, we need to avoid harmful subsidy races between Member States." She said the Commission would carefully investigate if Spain's planned support is really necessary for Peugeot to invest in genuinely innovative production processes in Vigo and if it will further develop the region without unduly distorting competition or harming cohesion in the EU.

PSA is a large industrial group active in the automotive sector. PSA is investing around €500 million in new production lines for the launch of new vehicles, as well as in process improvements in the existing plant of Peugeot Citroën Automobiles España in Vigo, Spain.

The work on the new production lines and processes started in April 2015. In November 2017, Spain notified the Commission of its plans to grant €20.7 million of public support for the project.

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 disadvantaged regions and to foster regional cohesion in the Single Market. 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 more disadvantaged ("anti-cohesion effect").

The Commission has doubts at this stage that the planned aid support of €20.7 million in Vigo complies with all criteria of the Regional State Aid Guidelines:

  • the Commission has concerns that the Spanish public support might have attracted the investment project away from an economically more disadvantaged region in another Member State, or that PSA would have carried out the investment in any event in Vigo, even without public support from Spain;
  • under the applicable rules on regional aid, investments by large companies in existing production facilities are generally not eligible to receive regional investment aid, except if the investments enable fundamental, innovative changes in the production process that are applied for the first time in the sector concerned in the European Economic Area (EEA). At this stage, the Commission has doubts on whether the planned production process is sufficiently innovative to qualify for this exception;
  • the Commission also has doubts in relation to the public support's contribution to regional development and on its appropriateness and proportionality; and
  • the Commission cannot, at this stage, exclude that the aid would have negative effects on competition in certain segments of the passenger car market targeted by the investment.

The Commission will now investigate further to determine whether or not these initial concerns are confirmed. The opening of an in-depth investigation provides Spain and interested third parties with an opportunity to comment on the measure. It does not prejudge in any way the outcome of the investigation.


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