Analyst: Musk may regret choosing Germany to build Tesla's first European factory

Tesla recently outlined the decisive factors for the location of its giant factory, including simplifying the various approval procedures as much as possible. Analysts believe this may be because the company has learned lessons from the German factory building process. Elon Musk probably wouldn't have his first European factory in Germany if he could do it all over again.

Ben Kallo, an analyst at financial services firm Baird, wrote in a research note that Tesla has experienced a lot of similar things in Gruenheide, outside Berlin. In April last year, the company complained that the process of getting final approvals for the plant was "annoying." Musk danced excitedly when the factory opened in March, in what was seen as a rare moment of celebration.

Tesla first announced in late 2019 that it would build a factory in Germany, but construction was delayed for months as environmental groups feared the facility would use too much water and threaten local wildlife. A few weeks after production finally started, Musk called Tesla's factories in Germany and Texas a "huge money melting pot" that has lost billions of dollars.

Now, more trouble is emerging. Last week, broadcaster RBB reported that Glenhead City Council had indefinitely delayed a vote on plans to expand Tesla's factory by about 100 hectares, which would add freight yards and warehouses for storing parts. At least part of the expansion would affect the conservation area, and any plan to cut down more trees would surely be met with fierce opposition from environmental groups.

Glenhead Mayor Arne Christiani said by phone: "It is important for Tesla to clarify development plans for the entire Glenhead facility with the relevant agencies, and it is unclear when this issue will be addressed. solve."

There are signs that the bureaucracy of the German government is paying a high price for Tesla's investment in Glenhead. Late last year, the company decided to forgo 1.14 billion euros ($1.12 billion) in state subsidies, as it opted to try producing new batteries first in Texas. Media reports this month said Tesla had suspended plans to make batteries in Germany and discussed shipping battery-making equipment to the United States.

But Joerg Steinbach, the economy minister of the state of Brandenburg, where the Tesla factory is located, said on Wednesday that he had received assurances from Tesla that the plan was going well. He tweeted after speaking with Tesla representatives in Washington: "Tesla's commitment to Glenhead remains unchanged, especially with regard to expansion plans for vehicle production. Battery plant nearing completion, internal process improvements and priorities Sequence is pending to be determined."

Amid all of this coverage, Tesla recently hosted an open house event at the Glenhead Convention Center. The Tesla employee, wearing a black T-shirt, described the automaker's plans for logistics, hiring, and expansion, and touched on a few more sensitive issues, such as water consumption.

Among the topics that have attracted more attention: Tesla employees said that due to supply chain obstacles, factory closures caused by epidemic restrictions and soaring logistics costs, it is no longer possible to meet scheduled production targets. That's why Tesla is trying to expand the factory, which has warehouses for more parts and a multi-track freight yard that moves goods from trucks to trains.

Tesla has made many unconventional moves to get out of production woes before, perhaps most notably in 2018, when the company faced challenges ramping up Model 3 production. Eventually, Tesla built a makeshift assembly line under a giant outdoor tent to ramp up production.

The German government's heavy bureaucracy and powerful unions make it more difficult to solve such unconventional problems. Musk said at Tesla's annual meeting last month that in Austin and Glenhead, there are still many problems to be solved. While both plants may be difficult to operate, the company has clearly shown a greater willingness to do more in Texas.

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