BMW, Volkswagen State Aid for Saxony Car Plants Probed by EU

German aid for car-plant projects by Bayerische Motoren Werke AG (BMW) and Volkswagen AG (VOW) face European Union probes amid concerns the subsidies may harm competition.

The European Commission said it needs to investigate whether state funding for the two projects in the German state of Saxony would violate rules restricting state aid that hurts competition in the 27-nation EU.

Regulators will examine a proposed 46 million-euro ($65.2 million) grant to subsidize BMW’s production of two models of electric passenger cars at its site in Leipzig. The EU said it “could not immediately decide” whether electric cars counted as new products that may be eligible for aid.

The EU review isn’t a surprise as the BMW plant will be Germany’s first production facility for electric cars, said Thomas Becker, a spokesman for the Munich-based company.

The EU will also investigate an 83.7 million-euro payment by German authorities to help pay for Volkswagen’s plans to change vehicle production at its Zwickau plant. Regulators said the aid may boost capacity for a market “that is undergoing falling or at the best stagnant demand.”

Volkswagen will provide whatever information the EU asks for as part of the “absolutely normal procedure,” said Gunter Sandmann, a VW spokesman in Zwickau.

To contact the reporter on this story: Aoife White in Brussels at awhite62@bloomberg.net.

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net.

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