Commission endorses €111 million aid to Hyundai Motor Manufacturing Czech for a new car manufacturing plant in the Czech Republic

The aid consists of a direct cash grant together with a transfer of land at a reduced price. The aid is combined with other regional aid measures to Hyundai Motor Manufacturing Czech which are granted under already approved aid schemes. The total regional aid package to the beneficiary company amounts to €194.49 million, for an eligible investment cost of €1.148 billion. The Commission considered the aid to be compatible with the state aid rules, based on the Commission’s cohesion policy and in conformity with the conditions for regional aid to large investment projects.

Competition Commissioner Neelie Kroes commented: ‘I am very glad to endorse aid for this important project, which will contribute to regional development and job creation in the Czech Republic’.

Hyundai Motor Manufacturing Czech is a wholly owned subsidiary of the Korean Hyundai Motor Company. The company plans to construct a car manufacturing plant with an initial production capacity of 200.000 passenger cars a year, which may be expanded within the same premises to a production capacity of 300.000 vehicles a year by 2012.

The investment is to take place in the municipality of Nošovice, close to Frýdek-Místek, situated in the region of Moravia-Silesia. The project is part of an overall investment project in the car sector which aims at creating 4.400 new jobs by 2011 (together with the suppliers Hyundai Mobis Automotive Czech, Dymos Czech Republic, and a Czech wholly-owned subsidiary of Hyundai Hysco Co. Ltd, which are located in close proximity). The project is expected to attract numerous additional investors in the car sector and therefore support the creation of new employment and economic development in the region.

On the basis of Article 87(3)(a) of the EC Treaty, state aid granted to promote the economic development of certain disadvantaged areas within the European Union may be considered compatible with the Single Market. The Commission considered the aid to be compatible with its rules on regional aid applicable at the time see IP/97/1137)and the specific rules applicable to the motor vehicle sector laid down in the Multisectoral Framework on Regional Aid for large investment projects, as amended in 2003see IP/03/1490).The intensity of the ad hoc aid proposed respects the specific regional aid ceiling applicable to the motor vehicle sector pursuant to the Czech regional aid map 2004-2006 (reduced to 30% of the applicable standard ceiling). Although as a general rule the Commission does not favour the award of ad hoc regional aid, in the present case the Commission is satisfied that the positive contribution of the overall investment project to regional development far outweighs the potential distortive effects of the aid.