Tesla’s German Gigafactory Faces Local Roadblocks As It Nears Completion

SpaceX founder and Tesla CEO Elon Musk as he visits the construction site of Tesla’s gigafactory in Gruenheide, near Berlin, Germany, May 17, 2021.

Michele Tantussi | Reuters

Electric car company Tesla is clearing the final hurdles to get the giant German “Gigafactory” operational in the new year.

The Berlin-Brandenburg plant has been in development for more than two years and although the boost to investment and employment has been praised by many, including mayor of the nearby town of Gründheide, its construction was affected by some local disputes and opposition.

The latest barrier, like reported by regional store RBB24, in connection with a dispute over a water pumping facility in the area where the Gigafactory is located that could have adverse effects on plant operations.

A hearing on the matter was scheduled to take place at the administrative court in Frankfurt (Oder) earlier this month but has been postponed. The case involves actions by environmental groups against local governments over the area’s water supply, including pumping water to a Tesla facility. It is expected to consume large amounts of water annually, which has attracted the interest of several environmental groups.

Tesla did not respond to CNBC’s request for comment.

It’s the latest development in a long winding story for Tesla and CEO Elon Musk – and getting the German facility up and running is absolutely a key element of Tesla’s future.

Dan Ives, managing director at Wedbush Securities, told CNBC: “Berlin is a key basis for Tesla’s capacity expansion plans for 2022 and beyond.

“The red tape is already huge for Tesla to get through, and it’s important that the plant will start producing cars in early January.”

Local barriers

Tesla announced plans for a Gigafactory near Berlin – its first in Europe – by the end of 2019, on the doorstep of traditional German auto industry giants such as Volkswagen and Daimler.

Despite the disruptions caused by the pandemic, Tesla proceeded with construction quickly, but from the moment the first brick was laid, it faced local challenges and red tape. Most recently, plans to expand the facility to include battery production have been criticized by some.

During the summer, an internal report warns potential accident risks at the facility. Meanwhile, the company has fined by local environmental authorities for a construction violation to occur.

However, the factory has received much support as a boon to the local economy and jobs, up to 40,000 jobs are expected to be created in the coming years. The mayor of the former town of Gründheide called it a “once-in-a-lifetime opportunity” to stimulate the local economy.

The shell of the futuristic battery factory on the Tesla Gigafactory site in east Berlin.

Patrick Pleul | image union | beautiful pictures

Ross Gerber, CEO of Gerber Kawasaki, an investor in Tesla, told CNBC he’s not too worried about the obstacles the company faces. “It’s not a big concern if we know that the factory will open soon,” he said.

“We’re extremely bullish on the European market and we see a lot of demand for Tesla.”

However, some have also expressed concern about its potential environmental impacts, with water supply problems being a frequent problem. In October, Musk dismiss the question, saying that there are plenty of water supplies in the area.

In it annual impact report for 2020Tesla says the new facility in Germany as well as its facility in Texas will result in “reducing the amount of water used in each of our vehicles,” but acknowledges that water supply is a challenge due to change. climate.

Read more about electric vehicles from CNBC Pro

“Water is becoming increasingly scarce as the climate changes,” the report said. That is why we are reducing our water usage throughout our operations as much as possible.”

Elsewhere, Tesla has faced court action over the number of trees cut down around German construction sites, while environmentalists expressed concern about the impact on native wildlife such as sand lizards.

“I think they underestimated the tough bureaucracy they would have to face when trying to build their mark on Berlin,” Ives said.

European market

According to Pedro Pacheco, an automotive analyst at Gartner, the impact of the factory in Germany will be gradual but significant.

“I think the most immediate difference is capacity in the sense that Tesla will have more capacity from a production perspective, there will be less lead time for customers in Europe because they won’t have to wait for the cars to arrive. the car came from China,” he said.

He added that if Tesla develops new models designed with the European market in mind, the Berlin facility will be “critical” to those efforts.

“Germany is one of the main automotive powerhouses in the world and certainly the main automotive powerhouse in Europe, so if you want to tap into talent in Europe, you have to go to Germany.”

The hunt for automotive and tech talent for the plant will be intense, as rivals like Volkswagen begin with plans to build their own electric vehicles in Wolfsburg.

Another issue that is emerging is the world’s ongoing supply chain disruptions and microchip shortages, which have hit the broader auto industry heavily.

Gerber told CNBC he believes the automaker has weathered the chip shortage crisis relatively well, but it will continue to be felt by industries through at least the first quarter of 2022.

“I still think it will be a challenge in the first quarter of next year but I think the tool will work on its own as we head into next year,” Gerber said. “I think it’s a problem that will subside on its own over the next 12 months.”


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