European Commission Approves €267 Million Slovak State Aid for Volvo Cars’ Electric Vehicle Plant

The European Commission has sanctioned Slovakia’s proposal to extend €267 million in state aid to Volvo Cars, earmarked for the development of a new electric vehicle manufacturing facility in Valaliky, near Košice, in Eastern Slovakia. This financial backing is deemed compatible with the EU’s State aid rules and is expected to advance several of the EU’s strategic goals, including job creation, regional development, and the objectives outlined in the European Green Deal.

The Slovak government notified the Commission of its intention to allocate €267 million to support Volvo Cars’ endeavour to establish its third European electric passenger vehicle production plant. This aid will be provided in the form of direct grants, with Volvo Cars committing an investment of €1.2 billion towards the project.

Anticipated to initially produce around 250,000 electric vehicles annually, the plant is projected to generate at least 3,300 direct employment opportunities, alongside additional indirect job creation. Emphasising sustainability, the project aims for climate neutrality from the commencement of production and will exclusively manufacture electric vehicles.

The selected site for the plant in Valaliky qualifies for regional aid under Article 107(3)(a) of the Treaty on the Functioning of the EU (TFEU) and is recognised as a Just Transition Fund territory, highlighting regions significantly impacted by the shift towards climate neutrality.

Upon review, the Commission concluded that the Slovak state aid measure aligns with EU State aid rules, particularly under Article 107(3)(a) TFEU and the 2021 Regional Aid Guidelines. The assessment determined that the aid would foster job creation and economic advancement and augment the competitiveness of an underprivileged area. It was also found that the aid would incentivise investment in Eastern Slovakia, with a circumscribed effect on competition and trade within the EU.

This approval is set against the backdrop of Europe’s ongoing efforts to mitigate regional disparities through regional aid, which seeks to promote economic development in disadvantaged areas while preserving fair competition among Member States. The Commission’s endorsement of the Slovak regional aid map for 2022-2027, alongside subsequent amendments, reflects a steadfast commitment to these objectives.

In summary, the European Commission’s approval of Slovakia’s €267 million state aid to Volvo Cars underlines a strategic initiative to support the European automotive industry’s transition towards electrification in alignment with EU State aid regulations and broader socio-economic and environmental goals.

Image: Volvo Car Group