The European Commission has authorised, under EC Treaty state aid rules, €14.3 million of aid, which the Slovak authorities intend to grant to Volkswagen Slovakia, belonging to the Volkswagen AG, for the transformation of an existing plant in Bratislava.

The European Commission has authorised, under EC Treaty state aid rules, €14.3 million of aid, which the Slovak authorities intend to grant to Volkswagen Slovakia, belonging to the Volkswagen AG, for the transformation of an existing plant in Bratislava. The Commission's assessment found the measure to be compatible with the requirements of the Regional Aid Guidelines 2007-2013 (see IP/05/1653 ). In particular, the project, involving eligible investments of €300 million by Volkswagen Slovakia, will significantly contribute to the development of the region's economy without unduly distorting competition.

Competition Commissioner Neelie Kroes said: “I am satisfied that Volkswagen's investment project will contribute to regional development in Slovakia without disproportionate distortions of competition”.

Volkswagen's investment project is aimed at diversifying the output and significantly increasing the production capacity of the plant in Bratislava. The investment creates additional capacity because it concerns the production of the New Small Family model (maximum capacity of 280 000 vehicles per year by 2012). The project involves investment costs eligible for the calculation of the aid of €300 million and an aid amount in the form of a corporate income tax allowance of €14.3 million. Volkswagen Slovakia finances the bulk of the project through own resources.

The project is to be carried out in the region of Bratislavský kraj, which was, at the time of notification, an area eligible for regional aid in virtue of Article 107(3)(c) of the Treaty on the Functioning of the European Union.

The aid would be granted under an existing aid scheme covered by the regional block exemption regulation (see IP/06/1453 ). However, due to the high amount of aid involved, the aid to Volkswagen Slovakia had to be notified to the Commission for individual assessment and clearance.

The Commission’s assessment of regional aid to large investment projects aims to verify whether the market share of the beneficiary and the production capacity created by the investment remain below the thresholds set in the Regional Aid Guidelines. When the thresholds are not exceeded, the effect of the aid on competition is deemed to be outweighed by its positive contribution to regional development.

The Commission found that Volkswagen's market share would remain below the 25% threshold in the car segments concerned (A00 segment and combined segment A000-A00-A0), both before and after the planned investment. The Commission also concluded that the capacity increase generated by the project would raise no concerns.