EC OKs Hungary's aid to Apollo for plant

Crain News Service report

BRUSSELS (Sept. 8, 2014) — Apollo Tyres Ltd. has settled on a site in northern Hungary — apparently — for its $650 million car and light truck tire plant, based on the European Commission's granting approval for Hungary to provide investment aid of nearly $124 million for the project.

Apollo, which first disclosed its intention to build a plant in eastern Europe in May, has not confirmed officially its selection of a site near Gyöngyöshalász, Hungary, for the factory, which could be in production as early as 2017.

Hungary's investment is in line with EU state aid rules, the EC said, and the aid granted by Hungary “favors regional development while any distortions of competition will remain limited.”

Apollo Hungary's investment project…will contribute significantly to the development of the region without unduly distorting competition in the Single Market,” said Joaquín Almunia, commission vice president in charge of competition policy.

The project is expected to create more than 975 new jobs in Gyöngyöshalász and the Észak-Magyaroszág region, an area with high unemployment and a gross domestic product well below EU averages, the EC said, making the area eligible for regional aid under Article 107(3)(a) of the Treaty on the functioning of the European Union (TFEU).

Hungary's proposed support for the Apollo project comprises a direct grant of $62.4 million, an employment grant of $3.6 million and tax allowances of around $58 million to Apollo Tyres (Hungary) Kft., the EC said.

The commission's investigation found that Apollo's market share for passenger car, light truck and medium truck/bus tires in the European Economic Area (EEA) will not exceed 25 percent after the investment. In addition, the proposed production capacity represents less than 5 percent of the EEA's market.

Apollo has stated on several occasions the plant will be designed with annual capacities of 5.5 million car tires and 675,000 truck tires. Production could start by early 2017, Apollo said recently, and then ramp up through 2019 to the final capacity.

Apollo also considered sites in Slovak Republic for the plant.

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This report is based on reporting by European Rubber Journal, a UK-based sister publication of Tire Business, and Tire Business reporters.