The European Commission has cleared Poland's €36 million investment aid to LG Chem for a new electric vehicle batteries plant in the Dolnoślaskie region under the EU State aid rules.
This investment aid will support the South Korean manufacturer's €325 million investment in a new vertically integrated manufacturing plant for the production of lithium-ion batteries in Poland.
LG Chem has reportedly signed battery supply deals with companies including VW, Audi, GM, Lucid Motors, and Faraday Future. Demand for electric vehicle batteries is rising rapidly and the new plant is expected to supply batteries for more than 80,000 electric vehicles per year in the European Economic Area ("EEA").
The European Commission assessed the aid measure under the Guidelines on Regional State Aid for 2014-2020 since regional investment aid to the automotive industry is no longer regulated by sector-specific rules since January 2007. It found that, without the funding, the project would not have been carried out in Poland or any other EU country. Furthermore, the aid is limited to the minimum necessary to trigger the investment in Poland rather than outside the EEA. In addition, the investment aid will contribute to job creation (the project is expected to create over 700 direct jobs) as well as to the economic development and to the competitiveness of a disadvantaged region.
The European Commission's conclusion was that the positive effects of the project on regional development clearly outweigh any distortion of competition brought about by the State aid.
The development and production of electric, connected and autonomous vehicles and vehicle components will require significant investments in the coming years. The European Commission's LG Chem decision is a useful illustration of the fact that the EU state aid rules do not stand in the way of government subsidies or tax breaks for such investments, in particular if they create jobs in disadvantaged regions.