The European Commission said it has started a probe into state aid granted by Hungary to Audi to see whether it met EU rules.
Audi is expanding its plant in Gyor, western Hungary, in a 1.2 billion euro project that is expected to create 2,100 jobs. Audi builds the A3 sedan, A3 convertible and RS 3 Sportsback in Gyor, as well as the TT sports car.
Hungary granted Audi 133.3 million euros of state aid for the project.
In a statement, the European Commission said it had concerns the aid could harm competition.
"Given the size of the project and the market share of the Volkswagen Group -- the owner of Audi -- the commission needs to verify the impact of the project on regional development and whether the aid is necessary to carry out the investment in Gyor," it said on Wednesday.
Porsche, BMW aid
The commission said it had authorized German aid worth 43.67 million euros to Porsche to extend its plant in Leipzig to build the Macan compact SUV. The total cost of the project is 522 million euros and it is expected to secure 900 existing jobs and to create more than 1,000 new positions.
The commission said its assessment showed that the aid was necessary for the project to go ahead in Leipzig.