Tesla's Gigafactory in Germany ready to roll

Tesla's plant was officially opened Tuesday in the presence of CEO Elon Musk and German Chancellor Olaf Scholz. Musk ceremoniously handed over the first Model Y cars to customers.

Before Giga Berlin secured a final permit from regional authorities earlier this month, Tesla had achieved something that was unheard of in recent German corporate history.

It had almost completely built a plant big enough to truly deserve the brand name Gigafactory, relying solely on a long string of about 20 different preliminary permits.

There had always been the chance of a final permission not being granted, which would certainly have caused chaos and required the company to remove everything they'd built. It was a huge risk, but CEO Elon Musk just pushed ahead.

The preliminary permits had enabled Musk's company to start the project with the logging of the surrounding forest areas some two years ago. Then came the building of the actual plant segments, which were eventually populated with state-of-the-art technology, including industrial robots.

Tesla started construction work at the site in Grünheide near Berlin in May 2020, meaning that only around 22 months have passed since then. Had it been up to the chief executive, the plant would have been inaugurated much earlier. Musk said delays along the way had to be attributed to notorious German red tape. 

Environmental concerns remain

Germans, however, felt the project had advanced with lightning speed. For some, it had progressed way too fast as they felt — despite several rounds of public hearings — that their environmental concerns, especially fears about excessive water consumption at the plant, had not been dealt with properly.

The most recent delays were due to unfinished assessments of Tesla's concepts for sewage treatment, as well as contingency and emergency plans. These included how the company would deal with any potential leakage of hazardous chemicals.

"After one year, Tesla decided to also build a battery factory there, meaning that the approval process had to start from the beginning — so the whole process didn't actually take too long considering the difficult issues involved," Hubertus Bardt from the German Economic Institute told DW.

In comparison, Tesla's factory in Shanghai, which is about the same size as Giga Berlin, took only 15 months to complete. In terms of granting permits for comparable projects, that was a record even by Chinese standards, as authorities there admitted back in 2019.

Decisive year for Tesla

Late last year, the electric car manufacturer had been allowed to expand preliminary tests at its new factory in Grünheide.

The regional environment office for the state had approved the application for a functional test with up to 2,000 more car bodies on top of the 250 agreed on earlier. Tesla was allowed to build the cars for testing, but not to sell them. Now it's a different ball game.

Production is set to be accelerated in the second half of 2022.Tesla may produce roughly 30,000 units in the first six months. Eventually, it aims to put out half a million cars there per year.

So far, Model Y fully-electric vehicles for the European market have come exclusively from Tesla's Shanghai plant, but this will change once Berlin is up and running.

For Musk, Giga Berlin is of strategic importance. Together with a new factory in Austin, Texas, he hopes to see Tesla become a real mass producer of electric cars in the course of the year. The US car manufacturer could be able to produce 1.3 million units globally in 2023. If it succeeds, it would leave behind such renowned brands as Volvo and Mitsubishi and be on a level playing field with Volkswagen's Skoda.

Jobs and revenues

Regional politicians see Giga Berlin as the most significant investment project across eastern Germany, and have pinned great hope on the factory's long-term economic effects.

The state of Brandenburg, which surrounds Berlin, is economically underdeveloped, with agriculture and above all mining being the most important sources of income, apart from tourism. But coal mining is to be phased out and new employment opportunities are desperately needed.

The Tesla plant in Grünheide will eventually employ 12,000 people, up from over 2,000 right now, according to IG Metall trade union estimates. Not many of them come from Brandenburg itself right now, but more jobs will be created if the state succeeds in turning the region into a future mobility and energy transition hub. Aspirations on all sides are high.

Battery cells made in-house

Tesla claims Giga Berlin will be the company's most advanced and efficient facility yet. Apart from manufacturing Model Y cars at record speed, the Grünheide premise will also include a battery cell production plant meant to be the world's largest such facility.

Musk has indicated the plant will have an annual production capacity of up to 100 gigawatt hours (GWh) in an initial stage, which may later be expanded to 200 GWh. But even the planned capacity at the start would be enough to produce batteries for well over 1 million Model Y cars.

Experts expect Tesla to produce a new generation of 80 by 60 millimeter cells, promising higher energy density. Eventually, that would mean that the cars could extend their current range by 16%.

Request for EU subsidies withdrawn

To the big surprise of many, Tesla in November withdrew its application for subsidies for its Grünheide battery plant, thus renouncing a sum that could have been as high as €1 billion ($1.13 billion). Was that just a noble gesture?

Tesla itself has recently said it wanted to protect its battery cell know-how with the move.

In addition, the Financial Times dug out a clause that might have been another plausible reason for Musk's move.

In line with subsidies rules within the EU's Important Project of Common European Interest program, enterprises are not entitled to receive funding for technologies that they're already using at other facilities, meaning the battery cells cannot already be made at another Tesla plant.

When Tesla announced its battery plans for Germany, it hoped the plant could be operational fast enough to be the first of its kind globally. But various delays at Giga Berlin seem to have thwarted that plan, given that the US carmaker is now deploying the same technology at its factories in Texas and Shanghai.

Any real competition in sight?

It's undisputed that Tesla doesn't depend on subsidies to compete with the big names in the German auto industry.

Volkswagen, BMW and Daimler with its Mercedes brand will have a hard time catching up with Tesla's advanced e-mobility concepts and technology as they jumped on the bandwagon rather late. Nevertheless, Tesla's German competitors are now hard at work electrifying their product range, and they have a lot more experience in mass-producing cars.

But for mass production to make sense, you need masses of people who can afford electric cars. So far, neither Tesla nor any German manufacturers have anything on offer for the not-so-affluent, particularly if carmakers would have to sell their e-models without the current state subsidies in place for buyers.

This goes for Tesla's Model Y in particular, which currently sells for over €55,000 in Germany.

This article was updated on March 22, 2022.

Edited by: Tim Rooks