Musk takes EV game to home of BMW, Audi
Billionaire carmaker announces plans for new plant in Germany
● Elon Musk picked a glitzy event in Germany, a few hours’ drive from the birthplace of the internal combustion engine, to drop the news before some of the world’s biggest car bosses: Tesla plans to set up shop in their back yard.
The billionaire CEO announced on Tuesday that Tesla will round out its global manufacturing network with a factory near Berlin. At a red-carpet awards ceremony attended by the heads of BMW, Volkswagen and Audi, he said the company would also establish an engineering and design centre near the city’s new airport.
“Some of the best cars in the world are obviously made in Germany,” Musk said, while accepting a trophy for the Model 3, which beat BMW and Audi vehicles for mid-size car of the year. He said the country is “not that far behind” in electric cars, though he acknowledged that the market for them is “unproven”.
Musk has said before that Tesla would announce the location for a factory in Europe before the end of this year, and that Germany was a frontrunner. Fresh off a surprise profit report that sent Tesla shares surging, he threw down the gauntlet in front of rival executives that no longer dismiss his company as a niche carmaker.
Musk has until now relied on a single vehicle assembly plant in Fremont, California, to build a $63bn (R940bn) company. Tesla is on the verge of starting sales of Model 3s produced at its latest production facility, near Shanghai.
Adding a European factory raises the stakes for established carmakers already facing a serious threat from the electric upstart, but Musk estimated earlier this year that Tesla’s European factory probably won’t be operational until 2021.
“The Berlin location serves two unique goals,” said Gene Munster, a managing partner at venture capital firm Loup Ventures. “It’s strategic to lure German automotive talent to Tesla, and it’s a statement that Elon wants to one-up auto companies from that region.”
The plant will be in Gruenheide, just over an hour’s drive from Berlin in eastern Germany, according to Berlin’s Tagesspiegel newspaper. About 10,000 jobs will be created, Bild reported.
Though the future of Germany’s electric-car market looks crowded, the politics of shifting away from the internal combustion engine are also going to be messy.
Daimler, the maker of MercedesBenz cars, is running into union resistance over where future electric cars will be produced. Audi, the biggest profit contributor to Volkswagen, faces similar fights over safeguarding employment at its main German factories.
German Chancellor Angela Merkel’s government and local carmakers have agreed to boost incentives for electronic vehicles, intensifying efforts to move away from the combustion engine.
Still, building vehicles in a country that has some of the highest labour and energy costs worldwide is bound to be a challenge. European customers also expect a network of dealers and repair shops to reliably handle maintenance and repair work, which Tesla has struggled with lately.
Adding production in Germany and China will probably help Musk boost Tesla’s sales in those regions, according to Kevin Tynan, a Bloomberg Intelligence auto analyst. “The sustainability of the demand will be more the question,” he said. “And if local competition becomes real competition, it will be more difficult.”
The Berlin government announced last week that cash incentives will jump by 50% to as much as à6,000 (R98,000) per electric vehicle, with the auto industry covering half the cost. The changes will take effect this month and run until 2025.
That Musk chose greater Berlin for a factory was “surprising but not fallacious”, said Ferdinand Dudenhoeffer, director of the Centre for Automotive Research at the University of DuisburgEssen. Battery-cell manufacturing requires space, infrastructure and subsidies, and the city is a good fit for a premium brand, he said.
Shortly after dropping the news, Musk sent out a pair of tweets to make sure it wouldn’t be missed by his 29.3million Twitter followers. He said the factory will make batteries, powertrains and vehicles, beginning with the Model Y crossover unveiled earlier this year.