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EC to probe proposed state support for Samsung plant

The European Commission (EC) said Monday it has opened an investigation to assess whether Hungaryʼs plans to grant EUR 108 million of public support to Samsung SDI for investing in the expansion of its battery cell production facility in Göd (20 kms north of the capital) is in line with EU rules on regional state aid.

“Public investment is important to foster economic growth in disadvantaged regions in Europe. But public support should only be given if itʼs 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 Hungaryʼs 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,” explained European Commissioner for Competition Margrethe Vestager, cited in an EC press release.

Samsung SDI is investing around EUR 1.2 billion to expand the production capacity of lithium-ion cells and battery packs for electric vehicles at its existing plant in Göd. In 2018, Hungary notified the Commission of its plan to grant EUR 108 mln of public support for the project.

EU state aid rules enable Member States to support economic development and employment in disadvantaged regions and to foster regional cohesion. In order to be approved, however, the measures need to fulfil certain conditions. 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 that is as or more disadvantaged (the “anti-cohesion effect”), and must not directly cause the relocation of activities to the Member State granting the support from elsewhere in the EU, the press release explains.

“The Commission has doubts that the planned aid support to Samsung SDI in Göd complies with all the relevant criteria of the Regional Aid Guidelines,” the EC said in the press release. 

The EC will examine whether the decision by Samsung SDI to invest in Hungary was directly triggered by the Hungarian public support, in line with the conditions, or if the investment would have been carried out in Göd even without the public support.

The Commission also has doubts over the state supportʼs contribution to regional development, as well as over its appropriateness and proportionality, and it cannot exclude at this stage that the public support may lead to the relocation of jobs from other Member States to Hungary.