BRUSSELS -- German state aid for car-plant projects by BMW AG and Volkswagen AG 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 ($64.7 million) grant to subsidize BMW's production of two models of electric passenger cars at its site in Leipzig.
In late 2013, BMW is planning to launch the i3 EV, previously known as the Megacity Vehicle, and the i8 plug-in hybrid under its i subbrand, both of which will be built in Leipzig, alongside the 1 series and the X1.
The EU said it "could not immediately decide" whether electric cars counted as new products that may be eligible for aid.
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. The automaker currently builds the Passat midsize sedan and the Jetta compact sedan at its Zwickau facility .
Regulators said the aid may boost capacity for a market "that is undergoing falling or at the best stagnant demand." Volkswagen and BMW didn't immediately respond to calls seeking comment.
Sources: Bloomberg with contributions from David Jolley