October 17, 2019: The European Commission announced on October 14 it had opened an in-depth investigation to assess whether Hungary’s plans to grant €108 million ($118 million) of public support to Samsung SDI for investing in the expansion of its battery cell production facility in Göd (Hungary) is in line with EU rules on regional State aid.
Commissioner Margrethe Vestager, in charge of competition policy, said: “Public investment is important to foster economic growth in disadvantaged regions in Europe. But public support should only be given if it’s necessary to trigger private investment in the disadvantaged region concerned. Otherwise, it only gives the beneficiary an unfair advantage over its competitors, at the expense of taxpayers.
“The Commission will carefully investigate whether Hungary’s planned support is really necessary for Samsung SDI to invest in Göd, is kept to the minimum necessary and does not distort competition or harm cohesion in the EU.”
Samsung SDI is one of the main players in the fast growing lithium-ion battery market. The firm is investing around €1.2 billion to expand the production capacity of lithium-ion cells and battery packs for electric vehicles in its existing plant located in Göd.
The work on the capacity expansion started in December 2017, and the implementation of the project is now well advanced. In 2018, Hungary notified the Commission of its plans to grant €108 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.
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 incentivize private investment, be kept to the minimum necessary, must not lure away investment from a region in another member state which is as or more disadvantaged (“anti-cohesion effect”), and must not directly cause the relocation of activities (such as jobs) to the member state granting the support from elsewhere in the EU.
The Commission has doubts at this stage that the planned aid support complies with all relevant criteria of the Regional Aid Guidelines, such as:
• the Commission has doubts whether the measure has an “incentive effect”. In this respect, the Commission will investigate whether the decision by Samsung SDI to invest in Hungary was directly triggered by Hungarian public support, in line with the conditions set out in the guidelines or whether the investment would have been carried out in Göd, even without public support;
• 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 exclude at this stage that public support may lead to the relocation of jobs from other EU member states to Hungary.