Croatia could face a heavy penalty due to Rimac: He gracefully withdrew from the business, and citizens will feel the damage
The story about robotaxis backed by entrepreneur Mate Rimac has recently taken a dramatic new turn. Rimac reportedly informed the government of Prime Minister Andrej Plenković at the beginning of the year that he planned to renounce €179 million in non-repayable European funds allocated for the robotaxi project. Ultimately, Rimac is expected to give up €89 million he has received so far and abandon the remaining funds yet to be disbursed.
To make matters more complex, the Ministry of Transport gave approval to postpone the deadline for the robotaxi project three months after Rimac's company announced it was withdrawing from the European funds. The public rightly wonders whether both Rimac and the government knew the entrepreneur was abandoning the European millions and, despite that knowledge, kept extending the deadlines in the grant agreement for months, thereby deceiving both citizens and the European Union. It is no secret that the final deadline for presenting a vehicle with level 5 autonomy was set for August 31, as publicly stated by Minister Oleg Butković.
"We have already had certain extensions to this project, and if it doesn't happen, then, of course, nothing will be paid, that is, the money that was paid will be returned to the budget. The matter is clear there," Butković claimed during the latest in a series of deadline extensions for Rimac's robotaxi. It should also be noted that in March, the European Commission paid Croatia the eighth tranche from the Recovery and Resilience Facility amounting to €897 million. According to the statement, Croatia could only receive this money after successfully meeting 17 required investment indicators, the fulfillment of which was confirmed by the Commission itself.
Grand promises
The most significant investment from this eighth tranche includes prototypes of fully autonomous electric vehicles and adequate testing of 60 vehicles, reminding us of another paradox. Rimac's prototypes are being verified in Sveta Nedelja instead of authorized service centers. The company Project 3 Mobility, subsequently renamed Verne, entered the National Recovery and Resilience Plan back in 2021, securing €179 million in non-repayable funds for the robotaxi project.
This is the largest single amount awarded to a private company under this EU-funded program. The project aimed to develop a fully autonomous electric vehicle with level 5 autonomy, meaning a vehicle capable of driving in all conditions without human intervention, driver, or pedals. Such a level of autonomy currently does not exist anywhere and is considered unlikely to be achieved in the top automotive industry before 2030. Despite this, the project was presented from the start as a sensation and as an option that would be realized in a relatively short time.
For over a decade, Rimac has successfully sold the public a story of a technological revolution just around the corner. All his projects, from the Concept One and Concept Two to the Nevera and finally the robotaxi, have mostly been presented as projects that would change the world, but each of these stories stalled in realization in the form initially presented to the public. Every announcement of a new project was met with media enthusiasm, while questions about concrete realization were absent. The focus would then shift to some new vision of the future, and so on in circles.
Prime minister in trouble
The Rimac case might remind the average person of an old friend to whom you lent money, and when it's time to repay, they start looking for another loan to create the illusion of success. All this might not be problematic if it weren't about €180 million of public money and a project promoted for years by the policy led by Prime Minister Andrej Plenković, who presented Rimac's robotaxis to Europe as one of Croatia's leading development stories. To be fair, Rimac must be credited as a skilled communicator who, over the years, managed to create the impression of technological genius and revolutionary progress, convincing the domestic political scene and a significant part of the public, while stifling any form of criticism by claiming that his project was being questioned by envious people who don't understand innovation. Now that the bubble around Rimac is starting to burst, the entire project leaves a series of questions—where are the concrete results, where did the public money go, and where is the actual technology?
Allegations that Rimac is renouncing European support suggest that Plenković is also trying to find a way out of a project that will not end as he had announced to citizens for years. That is why Plenković is no longer interested in his presentations, futuristic animations, and new promises, even though now is the moment when both he and Rimac should look the public in the eye and explain what exactly has been developed all these years. The public certainly deserves to know why the projects were constantly changed and why new deadlines were tirelessly given, accompanied by new announcements of project realization. Rimac must also explain where the money invested in the project, which he has presented for years as Croatia's technological future, has gone. That the return of money should not be presented as a simple solution to the problem is warned by Rimac's long-time critic, IT expert Lucijan Carić. "Returning EU funds for an unfulfilled contract and undelivered project is not an 'I was just joking' operation, like when you borrow €500 from a friend and return it after six months instead of the promised two. The return of funds would have serious consequences in a broad context that the mere act of returning the money cannot nullify.
"I think all control mechanisms have failed here, from the non-transparent evaluation of the project, non-transparent allocation of funds, non-transparent contract, non-transparent so-called feasibility study... Even communication with the public, largely misleading, was not transparent, and often not timely. At the same time, many unpleasant questions can be raised, such as the existence of good faith at the time of signing the contract. You can't just promise to deliver a non-existent third-party technology and then say – I'm sorry, 'they' screwed me. You were given a unique opportunity through a privileged allocation of a large amount secured by taxpayers. So you are not selling a vision, hope, or best intentions, nor ensuring employment or budget revenues, but promising the delivery of a specific product and service within a specific deadline. When you fail to fulfill that, it is legitimate to question everything you said and did on this matter from day one," Carić said.
Buying time
As problematic as this story is for Rimac, it is equally problematic for Plenković, whose government, two days before the announcement of Rimac's return of money, claimed in a response to the portal Teleskop that everything was fine with the project. The Ministry of Finance stated that all previous requests had been properly fulfilled, that there was a clearly defined plan, and that the government expected the successful realization of the project, which was proceeding within the planned deadlines. The question therefore arises whether the government was buying time with its responses and trying to control the political damage that Rimac's decision to return the money will certainly cause. This is a huge blow to Prime Minister Plenković, who advocated for a project whose technology, quite possibly, was never what it was presented to be.
In addition, Rimac, by returning the money, seems to be trying to avoid an option where the project ends in failure and comes under the scrutiny of the EPPO or OLAF. Critics wonder, besides Rimac, for potentially misleading the public, Plenković should also be held accountable, as well as his colleague from the European Commission, Ursula von der Leyen, who also warmly supported Rimac's project. Ultimately, the public gets the impression that this project works on a 'you scratch my back, I'll scratch yours' principle: Rimac did Plenković a favor so that the government could reach the threshold needed to obtain millions from the National Recovery and Resilience Plan, and now it seems both knew it was impossible to build the promised robotaxi. That raises another question: Was it Plenković who suggested to Rimac to return the money to mitigate damage and reduce public pressure until the last deadline? Pressure will be hard to avoid, as the opposition is already warning of non-transparency and asking where the returned money will be redirected.
When it comes to non-repayable funds, it should be noted that the European Commission rigorously conducts financial and technical audits of projects to which it has allocated funds, so Rimac will hardly avoid such scrutiny even if he manages to return the money, which from this perspective seems like the best loan in the world, because for €180 million, any fund charges at least €18 million per year. Those familiar with the topic explain that Rimac's company could legally invest the received money on the capital market, but note that the state suffered enormous financial damage due to lost time because nearly €180 million in public funds from the NPOO was frozen for years and reserved for a project that ultimately withdraws from European financing. While Verne had secured huge public capital without interest, all other domestic entrepreneurs were forced to resort to expensive commercial bank loans on the market, paying high interest rates.
Serious consequences
Either way, Croatia now faces a serious financial and procedural problem due to Rimac's withdrawal because the Recovery and Resilience Facility does not allow a simple return of money without consequences. The situation is more complex because the project is listed as one of the key national indicators within the National Recovery and Resilience Plan, so the withdrawal directly affects the state budget, as well as relations with Brussels.
When Verne officially returns the €89.7 million advance to the budget and the remaining €89.7 million remains undrawn, the government has no option to keep that money as a general budget saving nor can it automatically redirect it to other projects without approval from the European Commission. To use that money for anything else, even if it were for renovating kindergartens, Croatia must go through an official revision process of the NPOO with the European Commission. An additional problem is that the deadlines for spending all the NPOO money expire at the end of this year, so the state practically has no time to find new projects that can be contracted and completed within a few months. If an urgent and approved replacement is not found, those €179.5 million are permanently returned to the European budget, meaning Croatia loses the right to that part of non-repayable funds.
Since the European Commission does not directly penalize private companies (that is done by the state if private parties breach contracts), the Commission has the option to penalize a member state if it fails to meet the goals it proposed and signed. Funds from the NPOO are disbursed in packages, or tranches, only after a member state proves it has met a certain number of reforms and investments. Since in the Rimac case the final goal will not be achieved, the EC has the option to reduce, or even temporarily suspend, the payment of subsequent support to Croatia. The penalty is calculated according to a special EC methodology and, according to those in the know, the state could lose tens of millions of euros from future installments.
