Tesla Gigafactory: 5 Things to Know About Elon Musk’s New Plant

As Tesla chief Elon Musk delivered the first Model Y cars “made in Germany” to their new owners, here are five things to know about Tesla’s much talked-about “gigafactory”.

Humble beginnings

Just 30 cars made at the new factory in Gruenheide, in Germany’s eastern state of Brandenburg, were presented to their new owners at a special ceremony on Tuesday.

But the plant will eventually churn out around 500,000 Model Ys annually — a significant leap for Tesla, which last year produced just under a million vehicles in total.

The factory is being touted as the company’s “most advanced”, surpassing existing sites in Texas, Shanghai, and Fremont in technological prowess.

Until now, Tesla has been dependent on its Chinese site to produce Model Ys for customers in Europe.

The “Giga Berlin-Brandenburg” is “one of the biggest strategic endeavours for Tesla over the last decade and should further vault its market share within Europe over the coming years as more consumers aggressively head down the EV path,” analysts at investment firm Wedbush said.

German competition

For traditional German car manufacturers such as BMW and Audi, electric vehicles are still a niche product, expensive to produce and difficult to make a profit from.

But Tesla sold 936,000 electric cars worldwide last year and achieved a profit margin of 12.4 percent or EUR 5,100 (roughly Rs. 4.28 lakh) per car, according to German automotive expert Ferdinand Dudenhoeffer.

Tesla’s production model “is a very effective attack on German car manufacturers”, said Dudenhoeffer.

Volkswagen chief Herbert Diess pointed out recently that Tesla could manufacture a car in Gruenheide in 10 hours, while the same process takes the German giant’s main electric factory more than 30 hours.

Boost for the East

The Gruenheide factory is the largest industrial project to have been built in the former East Germany since reunification.

“Tesla has turned the spotlight on Brandenburg and East Germany,” said Dietmar Woidke, the state premier of Brandenburg.

This could be the start of “a reversal of the trend” of the former East lagging behind the West in terms of economic development, he said.

In the long term, the factory is set to employ 12,000 people and is also expected to attract a large network of subcontractors.

Built in just over two years, the factory should “serve as an example for investment projects in Germany” which too often come up against lengthy administrative procedures, according to the BDI industry lobby.

Environmental concerns

The construction of the “gigafactory” in a forest outside Berlin was repeatedly hampered by delays, in part due to protests from environmentalists worried about the impact on local wildlife.

Protesters were especially irked by the fact that Tesla was granted a special legal exemption to begin construction of the plant before it was officially granted permission.

The plant’s massive demand for water was also a sore point for residents in an area that has been hit by summer droughts in the last three years.

These problems led to construction being suspended several times and considerably delayed, with approval finally granted earlier this month.

Pet project

Musk himself was closely involved in the construction of the factory, meeting regularly with local officials and often lamenting the slow pace of German bureaucracy.

In April last year, Tesla said it was “irritated” by the administrative delays it had faced in the country.

“Tesla has experienced first hand how obstacles in German authorisation procedures slow down industrial transformation,” the company wrote in a letter to Berlin’s highest administrative court.

But Musk also sought to get the locals back on his side in October by organising a “Giga Fest” for thousands of people on the site, complete with live electro music and vegetarian food trucks.