Government had to provide raft of millions in incentives to bag new electric Volkswagen contract

Hundreds of million euros of incentives had to be provided to Volkswagen to convince the German manufacturer to produce its new electric low-cost vehicle at its Autoeuropa plant in Palmela.

Under an Investments Contract Regime, the government allocates €150 million per year. And there is another Contract Regime, RCM49, which was also a deciding factor in the negotiations to secure the contract against other competitors in other regions of the world who could have produced the new electric car, the ID.EVERY1 which is to be launched in 2027.

Figures from the Ministry of the Economy and AICEP met with Autoeuropa and with Volkswagen in Germany to present arguments that Portugal, with its competitive wages and quality workforce, should be chosen to produce the new vehicle above other competing VW plants around the world.

However, according to an interview with ECO magazine, the Minister of the Economy, Pedro Reis understood that the new investment from VW was not in the bag. Later the company’s management publicly praised the government’s involvement in the final decision.

According to the former Minister of the Economy, António Costa Silva, negotiations for the electric vehicle were advanced with funds via the Investments Contract Regime (RCM34/2023) of the 19 April, and also with incentives from the PRR Drivolution Agenda in which Autoeuropa does not directly participate because of strict environmental targets imposed from the EU Commission.

Despite not directly taking part in this Mobilising Agenda, Autoeuropa will cooperate in testing developed technologies with the company signing a letter of commitment to the Agenda on 11 December 2023.

Autoeuropa will also be eligible for funds from the development bank Banco Português de Fomento.

The bank’s new CEO, Gonçalo Regalado, has revealed that the bank is creating a financing line partnership not only with VW but also the Portuguese industrial sector for the re-industrialisation of the entire automative supply ecosystem.

In an interview with Jornal de Negócios/Antena 1 he said that the €1Bn line with a robust guarantee was one of the arguments presented to VW bosses which may also have helped clinch the deal.