An investigation has been launched by the European Commission into plans by the Slovakian government to grant £108 million to Jaguar Land Rover to support of its new car factory there.
The probe will look into whether the grant to luxury car manufacturer is in line with EU rules on regional state aid.
In December 2015, the West Midlands manufacturer announced it would be the first British car maker to open a factory in Slovakia, after reaching an agreement with its government.
The £1 billion plant in Nitra is currently under construction and will eventually employ around 2,800 people, with the first vehicles expected to come off the production line late next year.
The factory will have an initial capacity of 150,000 vehicles a year and will produce the new Land Rover Discovery.
The area is eligible for regional aid under EU state-aid rules and, in May 2016, Slovakia told the commission that it planned to grant £108 million of public support for the factory, the maximum aid that can be granted for such a project.
Margrethe Vestager, the EU Commissioner in charge of competition policy, said: "It is a good thing if public investment fosters economic growth in member states.
"However, we need to avoid harmful subsidy races between member states.
"The commission will carefully investigate if Slovakia's planned support is really necessary for Jaguar Land Rover to locate its investment in Nitra and is kept to the minimum needed, if it distorts competition or harms cohesion in the EU."
EU state-aid rules enable member states to support economic development and employment in the EU's less-developed regions but the measures need to fulfil certain conditions.
This includes that support must incentivise private investment, be kept to a minimum necessary and not lure away investment from a similarly or less economically developed region in another member state.
The commission said it had doubts the planned aid support in Nitra complied with all criteria of the regional aid guidelines.
It will investigate whether JLR's investment decision was triggered by considerations other than the public subsidy.
Slovakia claims that, without the aid, the investment would have taken place outside the European Union, in Mexico.
The commission will also investigate other elements of the agreement.
These include the Slovakian government transferring land for the new factory to JLR and exemption from a fee payable for converting agricultural land into industrial land.
A JLR spokesman said: "Slovakia's offer of support was a necessary component in Jaguar Land Rover's decision to select Europe rather than Mexico for this investment."
He added that the incentives provided were in line with regional aid guidelines.
