Vauxhall's advanced plans to build its new Vectra model in Britain with a government grant hit a potentially serious snag yesterday after the European commission queried the amount of the subsidy and launched a formal investigation into the matter.

Brussels said it thought the £10m government grant was too large and disclosed that it harboured doubts about the "necessity and proportionality" of the aid. The grant might need to be scaled down considerably, officials said.

The grant is designed to compensate Vauxhall, a subsidiary of General Motors, for deciding to invest £200m in its Ellesmere Port factory in Cheshire instead of GM's Antwerp plant in Belgium where the costs of producing the new Vectra would allegedly have been £10m lower.

EC officials said yesterday they found it hard to believe that it was that much more expensive to roll out the new car in the UK. They also complained that they had not received enough information about the project. "It may be a relatively small amount of money compared to the total investment but we have real doubts about it," said an EU source.

The money is supposed to cover the cost of retooling the Ellesmere Port plant, which employs 4,500 people, and of retraining personnel to work on a flexible production line.

Vauxhall conceded yesterday that the £10m grant was "very important" for the plan but refused to speculate on what would happen if the money was blocked altogether which is also a possibility. "We obviously think it's the right amount or we wouldn't have put it in," David Crundwell, Vauxhall's manager of business affairs, said.