The European Commission has concluded that Hungary's plan to support the construction of a new automotive components plant in Észak Magyarország is not in line with EU State aid rules. Therefore, the aid cannot be granted by Hungary.
The Commission's investigation
In October 2022, the Commission opened an in-depth investigation to assess whether Hungary's plans to grant €43.76 million (around HUF 15.9 billion) to GKN Automotive Hungary Kft (previously Rubin NewCo Kft) for the construction of a new automotive components plant in the northern Hungary region of Észak Magyarország was in line with EU State aid rules.
Based on its preliminary assessment, the Commission had found that the investment project facilitates the economic development and employment in a less advantaged region of the EU. Nevertheless, the Commission had doubts on whether the envisaged aid was in line with the Commission's Guidelines on Regional State Aid ('RAG'). Among others, the Commission decided to further 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 Commission's assessment
Based on its in-depth investigation, the Commission concluded that Hungary failed to prove that the aid was decisive for the beneficiary to locate its investment in Hungary. The available evidence showed that the beneficiary had decided to invest in Hungary without considering the public support and there was no sufficient evidence that the investment would take place in another location.
Since the public support did therefore not have a real "incentive effect" and it did not effectively encourage GKN Automotive Hungary to invest in the specific region of Észak Magyarország, the aid is incompatible with EU State Aid rules. Therefore, the aid cannot be granted by Hungary.
Background
The RAG set out the rules under which Member States can grant State aid to companies to support investments in new production facilities in less advantaged regions of Europe, while ensuring a level playing field between Member States.
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.
