SpaceX founder and Tesla CEO Elon Musk watches as he visits the construction site of Tesla’s gig factory in Gruenheide, near Berlin, Germany, on May 17, 2021.
Michele Tantussi | Reuters
Elon Musk officially opens Tesla’s first production facility in Europe on Tuesday, as the company looks set to take the pressure off its other factories in the US and China.
Tesla’s CEO will cut a red ribbon at the new Giga Berlin (or Gigafactory Berlin-Brandenburg) plant in Grünheide, a coal town in Brandenburg, Germany, within commuting distance of the capital.
Tesla sees the Berlin factory produce up to 500,000 vehicles annually.
Tesla has struggled to keep up with demand, and there are reportedly long delays for Model Ys and certain Model 3s in different parts of the world.
Last week, Tesla had to temporarily shut down production at its Shanghai plant due to Covid-19 cases re-emerging in China. The limited production of made in China Model 3 and Model Y vehicles there for at least two days.
In recent quarters, Tesla has exported cars from China to customers in Europe.
Demand for electric cars remains very high in Europe, and now Tesla can rely on some production on the continent, not just to be shipped from China.
Giga Berlin has been underway for several years. This is extremely important for Tesla’s plans to expand globally following the opening of its Gigafactory 3 plant in Shanghai in late 2019. The company also recently opened another plant in Austin, Texas.
In November 2019, when Musk announced plans to build a car factory in Germany, he praised German engineering.
He said: “Everyone knows that German technology is excellent, for sure. That is part of the reason why we are locating our Gigafactory Europe in Germany. We also want to create an engineering and design center in Berlin because Berlin has some of the best art in the world. ”
The German authorities gave Tesla conditional approval to start production on March 4.
The conditional license for the vehicle and battery factory in Brandenburg was expected after months of delays. Tesla intended to start producing vehicles before the early summer of 2021, but the Covid pandemic, supply chain complications and clashes with environmentalists slowed its progress.
While the plant is up and running, water consumption at the plant is still a problem.
“The impact on the local water supply remains a concern for the future of the plant,” Deutsche Bank’s auto-sector analysts said in a research note on Monday. They added that Tesla will have to provide evidence of adequate water consumption and air pollution control to really increase volume.
“Sources indicated that the company can completely deplete the water reserve in the region with the first phase of the plant’s expansion and will need additional production licenses to expand its capacity further in the future,” the memo said.
“As such, Tesla will reportedly have enough supply to support the original 500,000 volume target, but may face further obstacles as it plans to expand each of its Gigafactorys to ~ 1 million units of annual production.”
—Further reporting from CNBC’s Lora Kolodny.