This gives Tesla direct access to the European electric vehicles (EV) market, which is expected to be the next biggest EV market after China, due to the country’s stringent carbon dioxide (CO2) emission regulations, says GlobalData, a leading data and analytics company.
Calum MacRae, Automotive Analyst at GlobalData, comments: “Locating the plant in Germany gives Tesla an expensive, but highly qualified workforce. There is a huge amount of value in the automotive manufacturing and supply chain clustered on Germany that Tesla can draw upon, and the ‘Made in Germany’ tag still carries significant weight in the premium car market.”
European EV production is expected to double from 0.8 million units in 2020 to 1.7 million by 2023, which is then expected to reach five million by 2034. European production will be second to China, which is predicted to manufacture around 1.2 million in 2020, rising to 3.9 million by 2023 before more than doubling to 8.2 million.
David Leggett, Automotive Editor at GlobalData, added: "A production hub situated at the heart of Germany, and close to its customer base, will help Tesla to build manufacturing and cost efficiencies. Ultimately, a car company with global market ambitions has to have its manufacturing footprint spread around the world. With manufacturing facilities in North America, China and Europe to serve those major regional markets, Tesla can build a more balanced manufacturing network and improve its logistics and distribution processes - something that has not always been smooth due to over-reliance on its Fremont, California, production base.”
Tesla is also establishing an engineering and design centre in Berlin to tap Germany's rich engineering resources and talent pool.
Leggett concluded: "Germany was always a front-runner for Tesla's first European plant because of its position at the heart of Europe's automotive industry and market, its established premium brands and indications from the German Government that it will be very supportive in encouraging e-mobility.
"This move is a long-term strategic play and makes sense on that basis. However, the company has big near-term challenges, including the on-going ramp-up of Model 3 volumes, successfully bringing the Shanghai manufacturing plant on stream, ensuring a smooth production rollout next year for the Model Y and maintaining Tesla on a path to positive cash-flow and profitability."
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