Commission approves €267 million Slovak State aid measure to support Volvo Cars’ new electric vehicle plant

This article is brought to you in association with the European Commission.

The European Commission has found that Slovakia’s €267 million measure in favour of Volvo Cars is in line with EU State aid rules. The investment aid will support the establishment of a new electric passenger vehicles production plant in Valaliky near Košice in Eastern Slovakia. The measure will contribute to the EU’s strategic objectives relating to job creation, regional development and the European Green Deal.

The Slovak measure

Slovakia notified the Commission of its plan to grant €267 million to support Volvo Cars in the establishment of a new electric passenger vehicles production plant. The plant will be the third production facility of Volvo Cars in Europe.

Under the measure, the aid will take the form of direct grants totalling approximately €267 million. Volvo Cars will invest €1.2 billion in the project.

The plant is expected to have an initial capacity of approximately 250,000 electric vehicles per year. The project will create at least 3,300 direct jobs, as well as further indirect jobs. The project is also expected to bring sustainability benefits by aiming to be climate neutral from start of production and by offering only electric vehicles.

The production plant will be located in Valaliky, an area eligible for regional aid under Article 107(3)(a) of the Treaty on the Functioning of the EU (‘TFEU’). This area is also identified as a Just Transition Fund territory, that is areas most negatively impacted by the transition towards climate-neutrality.

The Commission’s assessment

The Commission assessed the measure under EU State aid rules, in particular Article 107(3)(a) TFEU, which allows Member States to promote the economic development of the most disadvantaged areas of the EU, and the 2021 Regional Aid Guidelines.

The Commission found that:

• The measure will contribute to job creation, the economic development and the competitiveness of a disadvantaged area.
• The aid has an incentive effect as, without the public support, the beneficiary would carry out the project in an alternative location outside the European Economic Area.  
• The measure has a limited impact on competition and trade within the EU. In particular, it is necessary and appropriate to set up the new production plant of Volvo Car Slovakia, while contributing to the regional development.
• The aid is proportionate and limited to the minimum necessary to trigger the investment in Eastern Slovakia. It will not exceed the maximum allowed aid amount for the project calculated based on the Slovak regional aid map. 

On this basis, the Commission approved the Slovak measure under EU State aid rules.

Background

Europe has always been characterised by significant regional disparities in terms of economic well-being, income and unemployment. Regional aid aims to support economic development in disadvantaged areas of Europe, while ensuring a level playing field between Member States. 

In the 2021 Regional Aid Guidelines, the Commission sets out the conditions under which regional aid may be considered to be compatible with the internal market and establishes the criteria for identifying the areas that fulfil the conditions of Article 107(3)(a) and (c) of the TFEU (a- and c-areas respectively). On this basis, Member States notified their regional aid maps to the Commission for approval.

On 16 September 2021, the Commission approved the Slovak regional aid map for granting regional aid from 1 January 2022 to 31 December 2027. On 17 February 2023 and on 16 November 2023, the Commission approved amendments to the Slovak regional aid map in the context of the Just Transition Fund and the mid-term review, respectively.

The non-confidential version of today’s decision will be made available under the case number SA.103740 in the State aid register on the Commission’s 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 Competition Weekly e-News.