State aid: Commission approves €89.6 million Hungarian investment aid to Samsung SDI's electric vehicle battery plant

The European Commission has found Hungary's €89.6 million measure in favour of Samsung SDI to be in line with EU State aid rules. The investment aid will support the expansion of Samsung SDI's battery cell production facility for electric vehicle (‘EV') in Göd. The aid will contribute to the development of the region and to job creation, whilst preserving competition.

The Hungarian measure

Samsung SDI is one of the main players in the fast-growing market of lithium-ion batteries . In December 2017, Samsung SDI decided to invest €1.2 billion to expand the production capacity of its existing battery cells production facility for EVs in the region of Göd.

The plant reached full production capacity in January 2022, supplying more than 6 million battery cells per month to customers mainly in the European Economic Area and creating 1,200 new direct jobs.

The production plant is located in Göd, in the region of Pest (Central Hungary) - an area eligible for regional aid under Art. 107(3)(a) of the Treaty on the Functioning of the European Union.

In 2018, Hungary notified the Commission of its plans to grant €108 million of public support for the project. In October 2019, the Commission opened an in-depth investigation to assess whether the measure was compatible with the Guidelines on Regional State Aid for 2014-2021 In June 2021, the Commission extended the scope of its investigation. In particular, the Commission sought to clarify whether:

• the aid has an “incentive effect”, i.e. whether the decision by Samsung SDI to expand its battery production capacity in Hungary was directly triggered by the public support or whether it would have been carried out in that area even without the aid;
• the public support would contribute to regional development and whether it was appropriate and proportionate;
• the public support could lead to the relocation of jobs from other EU Member States to Hungary.

The aid was granted in December 2021, subject to the Commission approval.

The Commission's assessment

During its in-depth investigation, the Commission received and analysed feedback submitted by Hungary and by Samsung SDI. The Commission investigation showed that:

• without the public funding, the project would not have been carried out in Hungary or any other EU country, but it would have taken place in a third country since it would have been more profitable for Samsung SDI to produce battery cells there and to export the finished product to Europe; 
• the aid is limited to the minimum necessary to incentivise Samsung SDI to carry out the investment in Hungary if it does not exceed €89.6 million. As a result of the investigation, the Commission established that the initially notified €108 million aid exceeded the minimum necessary to incentivise investment;
• the regional investment aid will contribute to job creation, as well as to the economic development and to the competitiveness of a disadvantaged region.

On this basis, the Commission concluded that the positive effects of the project on regional development clearly outweigh any distortion of competition brought about by the State aid. The Commission therefore approved the Hungarian measure under EU State aid rules.

Background

Under the Guidelines on Regional State Aid for 2014-2020, an aid measure has to meet the following conditions in order to be approved by the Commission:

• The aid must have a real "incentive effect", in other words, it must effectively encourage the beneficiary to invest in a specific region;
• The aid must be kept to the minimum necessary to attract the investment to the disadvantaged region;
• The aid must not have undue negative effects, such as the creation of excess capacity in a declining market;
• The aid must not exceed the regional aid ceiling applicable to the region in question;
• The aid must not directly cause the relocation of existing or closed down activities from elsewhere in the EU to the aided establishment; and
• The aid must not divert investment away from another region in the EU, which has the same, or lower, level of economic development than the region where the aided investment takes place.

In April 2021, following an evaluation of the Guidelines on Regional State Aid for 2014-2021 conducted in 2019 and an extensive consultation of all stakeholders on the draft text, the Commission adopted revised Regional Aid Guidelines for 2022-2027. While the main elements of the rules remained unchanged, the revised Regional Aid Guidelines include a number of targeted adjustments to simplify and reflect experience gained from the application of the previous rules, as well as to reflect new policy priorities related to the European Green Deal and the European Industrial and Digital Strategies. Within the framework of the revised Regional Aid Guidelines, on 16 September 2021, the Commission approved under EU State aid rules, Hungary's map for granting regional aid from 1 January 2022 to 31 December 2027.

The revised Guidelines started applying as of 1 January 2022. They do not apply to aid granted before 1 January 2022 (as in the case at stake), which has therefore been assessed under the Guidelines on Regional State Aid for 2014-2021.

The non-confidential version of the decision will be made available under the case number SA.48556 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 State Aid Weekly e-News.