The Commission has launched an in-depth investigation to determine whether a €96 million aid that France plans to grant Peugeot-Citroën and other partners for the development of a hybrid diesel car (VHD) is compatible with EC Treaty state aid rules. The Commission fully supports the development of less polluting cars. However, in the present case, the Commission thinks it likely that Peugeot-Citroën, the second largest automobile manufacturer in Europe, would have undertaken this project anyway, even in the absence of a state subsidy, given that other car makers have announced similar projects in relation to more environmentally friendly cars. The opening of an in-depth investigation gives interested parties an opportunity to comment on the proposed measures. It does not prejudge the outcome of the procedure.

France plans to grant €96 million aid to Peugeot-Citroën and 16 partners in the form of grants and repayable advances for the development of various parts of a hybrid diesel car. The total R&D costs of the project are €470 million out of which €271 million would constitute costs eligible for aid. The programme is within the framework of the French Industrial Innovation Agency aid scheme, which was authorised by the Commission on 19 July 2006. The aim of the VHD programme is to produce a car that emits less than 90g/km of CO2 and has a fuel consumption of less than 3.4 litres/100 km. At the same time, the programme aims at substantially reducing the additional costs of buying a hybrid car.

The most important innovations envisaged are:

  • a cost reduction of the main components by a factor of 3
  • the development of components and systems that maximise the use of electric and thermal energy in order to reduce fuel consumption
  • the development of other components contributing to the reduction of fuel consumption (braking system with energy retrieval, low resistance tyres, etc.) and
  • a reduction of the vehicle's weight (doors, lighting, seats, ...).

An increase of R&D in the EU contributes to growth, prosperity and sustainable development. When the market is unable to trigger R&D activity in a given field, well targeted state aid can create the right incentives for companies to carry out such R&D. However, the Commission has doubts whether Peugeot-Citroën and its partners really need this aid to produce less polluting cars. The automobile sector is one of the most R&D intensive in the European economy and similar pro-environment projects have been announced by competitors. Therefore, the Commission has doubts that a market failure exists in this field. Aid where there is no market failure would give an unfair advantage to Peugeot-Citroën and its partners. The Commission also doubts whether the aid to be granted via the VHD programme would not simply help to finance R&D that the beneficiaries would have carried out in any event, even without aid.

Before it can take a final decision, the Commission needs to assess in-depth the potential impact of the aid on competition and on trade within the Single Market. [13 November 2007]