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Will Tesla soon be 'Made in Germany'?

July 31, 2018

The Silicon Valley carmarker is facing major profit pressures yet it retains big global ambitions. A report says that the company is in talks with two European countries over the building of a huge factory.

Tesla Motors Fremont
Image: Getty Images/J. Sullivan

Tesla is reportedly in talks with officials from Germany and the Netherlands over the possible building of a major factory in one of the two countries.

Officials from the German states of Rhineland Palatinate and Saarland confirmed to the Wall Street Journal that talks with the US carmaker were in the early stages, while a Dutch government official said Tesla had also discussed an option to build its so-called 'gigafactory' in the Netherlands.

Read more: Will the dawn break for Tesla?

The Silicon Valley company, a world leader in electric vehicle innovation which also has major operations in battery storage, recently agreed to build a plant in China with the capacity to build up to 500,000 vehicles a year.

The company's boss Elon Musk last month suggested that the car maker was eager to make a similar announcement with regard to a European plant by the end of 2018, saying that Germany was a "leading choice."

Tesla has declined to comment on the report. The company currently does most of its vehicle assembly at its vast plant in Fremont, California but its European headquarters are in the Netherlands, where it currently has a facility which modifies vehicles made in California specifically for the European market.

With the company facing major pressure to ramp up its production rate in order to finally make a profit, Musk is eager to begin manufacturing in China and Europe, currently the world's two biggest regions for electric-car sales.

Electric Europe

The officials involved in the talks told the Wall Street Journal that the idea would be to build a major Tesla plant to make both electric cars and batteries. With various automakers ramping up their own electric vehicle production as the industry goes through a major strategic shift, Tesla is eager to cement the gains it has made in the electric sector.

With Tesla's interest in opening a substantial European base known for some time, officials from Saarland and Rhineland Palatinate — both situated close to the borders of France, Belgium and Luxembourg, an area favored by Musk — have been lobbying the company for several months.

Germany sluggish on electric car uptake

"We have done everything possible to assure that Rhineland Palatinate is in the competition for the plant," said Ralph Schleimer, a state official in Rhineland Palatinate.

A spokeswoman for the finance ministry confirming that "the ministry of finance has a good line of communication with the company," pointing out that Tesla already has a site in the state — its subsidiary Tesla Grohmann Automation — which builds automated systems for vehicle manufacturing.

Officials from Saarland approached Tesla in March, with the company agreeing to meet earlier this month. "They are looking at us to see if we fit their needs," Anke Rehlinger, the state's economics minister, told the Wall Street Journal.

Global expansion, but profit a problem

Tesla has been under particular pressure to hit certain targets for weekly production of its Model 3 car, seen as a 'mass market' vehicle for the company and therefore critical to the share price and ultimate hopes of long-term profitability.

Tesla finally hit its long sought-after production rate of 5,000 units per week in late June, but doubts persist over the company's ability to turn a profit. The company recently wrote to suppliers asking for a portion of previously paid fees to be paid back to it, in order to help it move into the black.

aos/kd (dpa, AFP)