ELECTRIC VEHICLES MANUFACTURING SERBIA

The project concerns the promoter's investments at the Kragujevac plant (Serbia): (i) to upgrade, modernise and adapt the facility for the integration and deployment of advanced manufacturing technologies for the production of a new platform of electric vehicles (EV); (ii) to install PV equipment for the production of a part of the energy needed at the plant; (iii) for the process improvements, the training, upskilling and reskilling of the plant's employees. The investments started in 2022 but will be carried out primarily in the period 2023-2024

The implementation of this project will make possible reconverting the Kragujevac factory for the production of EVs, increasing the local employment, relaunching the industrial activity in the area and developing a local supply ecosystem focused on electric vehicles. The Kragujevac factory will be the first BEV-dedicated facility within the Stellantis Group, optimised to produce a new car modular platform and will introduce advanced manufacturing technologies, in particular across the body-shop, the assembly, the logistics areas as well as the battery assembly area.

The project concerns the promoter's investments to convert the Kragujevac factory to the production of electric vehicles (EVs). It will contribute to the deployment of advanced manufacturing solutions further enabling affordability, efficiency, performance and accelerated adoption in the market of small EVs, by helping to lower the remaining barriers to adoption and leading to environmental externalities. It will contribute to further knowledge creation and diffusion (through deployment of breakthrough technologies, workforce upskilling and retraining).

The project contributes to EIB "Innovation, Digital and Human Capital" and the EIB Economic and Social Cohesion (Regional Integration outside EU) policy objectives. It will directly and indirectly help preserve and increase employment in Serbia, an EU candidate country, contribute to economic growth, the development of local economic and social infrastructure and further economic integration between Serbia and the EU partner countries. It also qualifies under the EIB Climate Action and Environmental Sustainability policy objective. The project addresses the specific objectives set for EIB financing under its own-risk Pre-Accession Facility (PAF) as it will contribute to local private sector development and climate change mitigation, through the production and market introduction of EVs. It contributes to the achievement of the UN SDGs, namely SDG7 (Affordable and Clean Energy), SDG8 (Decent Work and Economic Growth), SDG9 (Industry, Innovation and infrastructure), SDG10 (Reduced Inequalities), SDG11 (Sustainable Cities and Communities), SDG12

(Responsible Consumption and Production), SDG13 (Climate Action).

The promoter's investments address the market failures and gaps associated with (i) imperfect competition and incomplete markets for very innovative EV technologies, and those addressed by (ii) projects with positive environmental externalities generation.

The promoter's experienced management and project implementation capabilities, focus on innovation and sustainability, technology edge and industrialisation capability will help implement a sound and sustainable project, integrating positive environmental and social dimensions, contribute to address and mitigate market failures, and through its additionality, contribute to the Bank's policy objectives.

The EIB financing will help the borrower to access long-term corporate debt, which is otherwise not available on the Serbian domestic market. The EIB loan is expected to benefit the borrower in terms of financial facilitation, as the maturity offered matches the economic life of the assets. In addition, the EIB financing will send a strong positive signal about the borrower's electric vehicle manufacturing strategy. It will also demonstrate the EIB's continued support for the promoter and for vehicle electrification.

If the project were located within the EU, it would be subject to the EIA Directive 2011/92/EU as amended by Directive 2014/52/EU and may fall under Annex II where in general manufacturing and assembly of motor vehicles would require screening for an EIA or fall below the threshold for screening given the parameters of the investments, at the discretion of the competent authority. The project is located within an existing factory site and it is unlikely to have any significant impact on nature conservation sites. The Bank's services will clarify the possible need for an EIA (or equivalent) during the appraisal, as well as any other environmental detail. The project will contribute to deploy innovative vehicle electrification technologies, contributing to lower barriers to adoption in the market, thus furthering the sustainability of the automotive sector and it is expected to contribute to the Bank's Climate Action and Environmental Sustainability objective.

The Bank will require the promoter to ensure that implementation of the project will be done in accordance with the Bank's Guide to Procurement and the relevant applicable EU public procurement rules.