The European Commission has authorised €57.9 million of regional investment aid to the Hungarian company Hankook Tire Hungary Manufacturing and Trading Ltd (“Hankook Hungary”) for the construction of a tyre plant in Rácalmás, Fejér county, Hungary. The Commission found that the measure favours regional development while limiting the distortions of competition brought about by the state aid. It is in line with the Commission’s guidelines on regional aid (see IP/05/1653), in particular with the rules on large investment projects.
“Hankook’ Hungary’s investment project is expected to create 950 new jobs in Rácalmás. It will provide a welcome boost to the development of the region without unduly distorting competition in the Single Market.” said Commission Vice President in charge of competition policy Joaquín Almunia.
In December 2013, Hungary notified plans to support the construction of a new tyre plant next to Hankook Hungary’s existing plant in Fejér County with a direct grant of €24.1 million and tax allowances of around €33.82 million. The project involves investments of €305.5 million. It is to be carried out in Rácalmás in the Central Transdanubia region, an area with high unemployment eligible for regional aid under Article 107(3)(a) of the Treaty on the functioning of the European Union (TFEU). The state aid is based on existing aid schemes but had to be notified to the Commission for individual assessment and clearance, because of the high aid amount that carries a higher risk of distorting competition.
The project is expected to create over 950 new jobs in the region. The Commission’s investigation found that the market shares of Hankook Tire (Hankook Hungary’s parent company) in the European Economic Area (EEA) market and world market for passenger car tyres and light truck tyres will stay below 25% after the investment. Moreover, the production capacity created by the investment remains below 5% of the market. The Commission therefore concluded that the measure’s positive contribution to regional development would outweigh the distortion of competition created by the state aid.
Background
Under the EU Regional Aid Guidelines (see IP/05/1653), the Commission may approve large investment projects during the preliminary examination phase, only if the beneficiary’s market share and the capacity increase created by the investment do not exceed certain thresholds. This is because such projects might distort competition more than smaller ones and the Commission needs to verify on a case-by-case basis, whether they really need state aid to go ahead.
If, as in the present case, the Commission finds that these thresholds are exceeded, it has to carry out an in-depth investigation on the basis of the method laid down in its Communication on the assessment of regional aid for large investment projects (see IP/09/993). This assessment verifies, in a first step, whether the aid is necessary to attract the investment into the region. In the affirmative, the Commission assesses in a second step whether the overall benefits for regional development outweigh the distortion of competition and trade between Member States brought about by the public intervention.
Hankook Hungary belongs to Hankook Tire Co. Ltd, a Korean publicly held company. Hankook Hungary is extending its facilities in Rácalmás by building an additional tyre plant next to its existing plant. The new tyres to be produced are ultra-high performance tyres, sealant and runflat tyres, which fall under the segment “passengers cars tyres” and “light truck tyres” and will be sold worldwide.
The non-confidential version of the decision will be made available under the case number SA.38093 in the State Aid Register on the DG 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.
Source: Europa
Published: 11 Mar 2014