BRUSSELS (July 24, 2015) — The European Commission (EC) has approved regional investment aid of nearly $129 million to Nexen Tyre Corp. Czech SRO to build a tire plant in Žatec, Czech Republic.
The Commission said that the aid granted by Czech Republic was compatible with European Union state aid rules, and that it promoted regional development without distorting competition in the internal market.
South Korea's Nexen Tire disclosed plans last June to invest $1.1 billion to build a car and light truck tire plant on an 86.4-acre site near Žatec northeast of Prague.
“This tire production plant will create at least 1,000 new jobs in Žatec and contribute significantly to the economic development of the region,” according to Margrethe Vestager, EU competition commissioner.
The Commission noted that Žatec is located in the Severozápad region, an area with high unemployment and a standard of living below the EU average, making it eligible for regional aid under EU state aid rules.
“I am pleased we today approved state aid to make this happen,” Ms. Vestager added. “It is a good use of public money in line with EU state aid rules.”
Czech Republic notified the EC of its plans in October 2014 to support Nexen with an aid package valued at about $129 million. The aid consisted of a direct grant of roughly $44 million, an employment grant of $11 million and about $74 million arising in tax relief and from the reduced land costs.
The project, according to Nexen, is intended to help the company meet its rising demand in Europe, and to supply OE tires to car makers, including Fiat S.p.A., Volkswagen A.G. and VW's Skoda Auto and Seat units.
There about 30 vehicle assembly plants within a 250-mile radius of Zatec.
Nexen Tire plant is set to begin operating in 2018 and then to gradually increase its capacity to over 12 million units a year. This will be Nexen's fourth tire plant. It has two in South Korea and one in Qingdao, China.