Tesla gigafactory in Germany hailed as gamechanger for lagging e-mobility transition

Tesla's decision to build its first European "gigafactory" for batteries and vehicles in Germany will be an enormous boost for the country's lagging shift to electric mobility, politicians and mobility experts have said.

Economy minister Peter Altmaier called the surprise announcement by Tesla CEO Elon Musk during an award ceremony in Berlin a "milestone" for the roll-out of electric mobility and the production of battery cells in the country. He said the investment will "enhance Germany's status as an automobile industry location on an international level."

"We now expect to have the chance to become an important international centre for this future field," Altmaier said in in a press statement.

Transport minister Andreas Scheuer said on Twitter Musk had made "a very good decision." Scheuer posted a photo showing the Tesla CEO and himself and argued Musk would find "the best engineering knowledge in the world" in Germany.

Musk said his company "will build batteries, powertrains and vehicles, starting with [the electric compact SUV] Model Y" in the new factory to be located just south-east of Germany's capital Berlin. Several European countries, as well as many locations within Germany had tried to attract Tesla. 

German daily Bild reported that Tesla plans to invest around 4 billion euros in the factory in Grünheide (Brandenburg), creating 3,000 jobs in a first step, which could be ramped up to 7,000 in a later stage. Start of construction is planned for early 2020, operation for 2021.

The factory will be located in the German state of Brandenburg, an economically relatively weak region that produces a lot of renewable energy. Brandenburg will also be affected by the country's coal exit due to extensive lignite mining in the state, however. Musk said his company would also build an engineering and design centre in neighbouring Berlin. The capital of "Green Energy Valley" Germany has become a hub for sustainable mobility and digital start-ups in recent years.

"A huge gain for the mobility transition"

Christian Hochfeld, head of clean mobility think tank Agora Verkehrswende*, called Tesla's decision "a huge gain for the mobility transition and the transformation of the German car industry”. He added: "Tesla puts German carmakers under pressure in the shift to green mobility and will give them a run for their money."

This view was echoed by media reports. Mobility newsletter Tagesspiegel Background wrote  that the decision meant "the e-car pioneer long laughed at by German competitors is attacking Volkswagen, Daimler and BMW head-on on their home market - as a producer, employer, engineer."

After dithering about the shift to electric mobility for years, Germany's largest car groups BMW, Daimler and VW have recently announced investments worth dozens of billions of euros in the technology. But the uptake of electric cars only gathers pace slowly, forcing the government to give up on its target to have one million electric cars on the road by 2020.

As a result of this indecision, the popularity of powerful SUVs and policy neglect, Germany has not managed to lower emissions in the transport sector at all during the past decades. But clean mobility experts stress that sustainable mobility will require much more than the roll out of electric vehicles – for example a shift to public transport, cycling and other forms of zero-emission mobility.

Ramona Pop, the Green Party economy Senator (minister) of the city state of Berlin, also told public Radio RBB that she hoped Tesla‘s move would spur the shift to clean, digital mobility in the country. The competition should motivate the German car makers to speed up, she said.

VW CEO Diess, who was present at Musk's announcement, thanked him for "pushing us" towards electrification. Under Diess' leadership, the world's largest carmaker has placed a huge bet on the mass breakthrough of electric cars by embracing the technology more vigorously than any other major auto company. The plan could turn diesel pariah VW into a "game-changing" pioneer, environmental NGOs have said. VW started production of its first purely electric model ID.3 earlier this month.

Days after Tesla's announcement, Volkswagen said it would increase its investments for hybridisation, electric mobility and digitalisation in the next five years to nearly 60 billion euros, 16 billion euros more than was previously announced. VW also increased the number of electric cars it says it wants to roll out over the next decade, including 75 completely electric models and around 60 hybrid vehicles. Previously, the company planned to introduce a combined total of 70 new hybrid and electric models.

Asked why German carmakers were behind in electrification, Musk replied: "I don’t think Germany is that far behind," adding that some of the best cars in the world are made in Germany. "Everyone knows that German engineering is outstanding and that’s part of the reason we’re locating our gigafactory Europe in Germany," Musk said.

The decision to base Tesla Europe in Berlin, on top of the VW announcement, sends several messages, wrote Erik Nielsen, Group Chief Economist at UniCredit Bank, London, in a weekly newsletter. The "doomsday prophecies about German automakers – some even having claimed that they were facing a “Kodak moment” – look increasingly silly," the "outlook for car sales is not as gloomy as many will have you believe," and “Berlin rocks”. Nielsen added "Berlin has been establishing itself for some years now as a tech and creative centre, not only in Germany, but in Europe […], and Musk’s decision to build his European operation here lends further support to this trend." Nielsen said that eastern Germany might develop into "Europe's EV hub" with Tesla's factory in Brandenburg, VW's plant for the ID3 in Zwickau and CATL's battery plant in Erfurt.

Brandenburg state Premier Dietmar Woidke said the region's strong renewable power production – the highest generation per capita in Germany – had been a decisive factor in negotiations with Tesla. "These are excellent news for our state," Woidke said in a press release. The "big investment" by the US carmaker will give the region "a boost as an international and innovative location and bring good work to many people."

*Like Clean Energy Wire and Agora Energiewende, Agora Verkehrswende is funded by the Stiftung Mercator and the European Climate Foundation.