When you think e-vehicles you think Tesla.
And it’s this man: Elon Musk, who made electric cars cool.
Tesla is worth over 700 billion dollars and is one of the largest
e-car manufacturers in the world.
But problems in its giga factories around the globe
are raising eyebrows.
Water and labor are both big issues.
We look to Germany, the USA and Mexico and ask...
Is the push to drive greener vehicles fueling various crisis?
We want to know...
What is the true cost of Tesla?
Tesla is known as a disrupter in the auto industry.
Its giga factories are massive compounds, like here in Grünheide,
a sleepy village about an hour outside of Berlin.
The facilities are designed to allow for faster and more
streamlined production, as Tesla aims to produce their slick e-vehicles.
But all this heavy manufacturing on one site means
concentrated water consumption.
The Tesla giga-factories started in the US, where
the company was founded.
Then China and auto-manufacturing giant, Germany.
Most recently, Texas.
Giga Berlin was a big step.
It's basically Tesla saying we're not scared of you.
Dan Ives is a Managing Director at WedBush Securities.
An investment bank based in the US.
I reached out to him because he’s a big time Tesla watcher.
We're going for you Mercedes, BMW and others,
and that's part of the Musk's mantra
which is hard to argue with
if you look at what's been accomplished last decade.
While the joke in Berlin at the time was that Musk, a noted Techno fan,
just wanted an excuse to visit some of the city’s most famous clubs,
the location was excellent for Musk for many reasons.
The factory was built at breakneck speed, especially for Germany
where bureaucracy, approvals and permitting can move at a glacial pace,
it opened its doors in 2022.
Germany has a long history of auto manufacturing.
So, one resource that the country has in abundance is well trained workers.
On top of a location smack dab in the middle of the EU.
At the end of the day,
it's the center of the auto industry.
Not just in Europe, you know
many could say globally.
So, Berlin made a ton of sense,
as well as the logistics of making cars in China and shipping them to Europe
was a logistical disaster.
And that's why Berlin has been so important terms that spider web
logistically getting it throughout Europe as well as from a cost perspective
going to be significantly less now.
But one resource that is not as abundant as one might think... Is water.
Which was apparently laughable to Elon Musk in 2021
when he was confronted with the idea that his factory might contribute
to water problems.
This region has so much water, look around you.
But the local water supplier says there’s no more water for
further development stages.
No, no, this is completely wrong.
It's like water is everywhere here.
Does this seem like a desert to you?
Yeah, to some extent I have to say,
I have some understanding for him
because it's a sort of bit strange.
This is Martin Pusch his work looks at waterway
ecosystems and management.
In the Berlin area, Brandenburg area,
we have 3000 lakes.
So, if you arrive by airplane,
you will see lakes everywhere.
So, we are rich in lakes, but we are poor in water resources.
So, this seems to be contradictory.
So, despite being known for lakes and rivers, canals and streams,
ground water levels in this part of Germany have been declining for years
due to climate change.
So, even as the needs of the area are increasing,
water levels are sinking.
Now, on the edges of the most populated city in Germany,
there’s a massive Gigafactory.
And that concentrated production?
It also means concentrated water consumption.
Not to mention, this area in Grünheide is actually in a “water protection zone”.
And there’s another problem.
The kind of soil that exists in this part of the country,
which is really sandy and almost like a sieve.
While it allows rainwater to quickly reach aquifers,
the sandy soil also makes it easy for pollutants to drain down
and contaminate drinking water.
In case such pollutants would enter the aquifer,
it could be, let's say, spoiled
and make unusable for drinking water purposes.
Especially as most pollutants cannot be
biologically, biologically or microbially degraded.
Since the completion of the factory,
there’s been intense scrutiny.
German magazine Stern reported about a battery accident starting a fire...
And contaminated water seeping into the ground.
Or in 2023 the magazine also reported about an illegal filling station
that leaked 250 liters of diesel “uncontrollably.”
These are just a few of the reported instances.
Environmental authorities also seem to be slow to
criticize the company.
In only four of these cases involving many different chemicals
have State Environmental Authorities ordered soil samples to be taken.
But is this simply a culture clash between an American company
and German bureaucracy?
So, the classical American approach.
I'm a I'm a settler, I'm going westward,
I'm using an area and then if
I've been using it then I move forward further.
So, this is obviously not possible in Central Europe.
So, we are limited in space.
Yeah, you have to deal more carefully with space
and other resources and that's why we have these relatively,
strict environmental regulations.
It would only be fair to mention that the first company to build
a factory in a water protection area in Germany was Mercedes-Benz
about a half hour away from the Tesla site.
But it’s not just a US vs Germany issue.
Around the world Tesla has a rocky history
with environmental regulations.
The LA Times reported about fines for a California facility amounting
to 275-thousand dollars from the Federal environmental
protection agency.
It’s not only environmental issues that the various Tesla factories have in common,
but also building in areas with water problems.
California, which is worldwide
known for all the problems,
Texas the same.
And also in China and near Shanghai even there is let's say enough
water volume, the quality is so bad, yeah, that you are not able to
drink the, the official drinking water there.
But let’s also look on the other side of the US border.
Tesla is currently planning to build another giga factory here in
the state of Nuevo Leon, Mexico.
That plant could open in the coming years...
but one big problem?
In February 2022, the state where that facility would be located
declared a state of emergency due to the drought there.
With two of the three dams that supply the metropolis of
Monterrey recording historically low levels.
But as of now, Tesla says it’s still moving forward with
the facility in Nuevo Leon.
Mexico is important because
of the low cost nature.
To produce what I believe
will be a sub 30,000-dollar vehicle
Mexico is really the only choice
and that's why logistically where it is relative to Austin makes a ton of sense.
This area outside of Monterrey, like the area outside Berlin, has
an existing automotive sector with companies that supply American
manufacturers like this one.
The company Kia is already operating in the state for example,
so Tesla could also be looking to court talent and take advantage
of the infrastructure already in place.
It's 80 percent of the exports of the auto industry
goes to the United States,
it's around 15 billion US dollars per year in
production and exports of auto parts and some
production of vehicles.
Manuel Montoya heads the Automotive Cluster of Nuevo Leon.
And in comparison with Mexico, Neuvo Leon is one of the main
states that produces the cars and auto parts.
Montoya says water concerns are “challenging” for existing
companies, but points to new plans on the horizon and already
in the works.
The Governor of Nuevo Leon unveiled an $1.25 billion dollar investment
plan designed to ensure the state’s water supply through 2050 to invest
in water infrastructure like new pipelines and a dam.
There's more water coming to the city
and state government of Neuvo Leon
has already a plan for the next 20 years
to supply the water that know not only that companies, but also the population
would need for the next 20 years.
But nearly 5 million people live in metro-area Monterrey.
There has already been water supply rationing in recent years with
media reporting that some water truck delivery drivers have even
been threatened with kidnapping.
In a time where climate change is adding even more stress,
here in Germany, Tesla’s environmental record is raising
concerns among activists.
Look, environmental is always been a push-pull
for Tesla that they need to navigate.
Clearly the green nature
in terms going to electric vehicles a lot
brighter spotlight, but it's a work in progress.
So how do these recent and planned build ups fit into
the global Tesla strategy?
The planned facility in Mexico and the gigafactory build up in Germany
will help Tesla compete on costs even as traditional car makers turn to EVs
and Chinese companies like BYD start to ramp up outside of China.
But let’s look at global sales.
Tesla may have brand recognition, especially in the West, but China
is gaining with BYD making massive strides in 2022.
Their sales more than tripled compared to 2021.
With German carmaker VW lagging behind in third place.
BYD, they continue to compete with from maybe
a global share perspective.
But when you think electric vehicles,
you think Tesla and that's been
a big part of their success.
Right now, it's still Tesla's World.
Everyone else is paying rent relative to globally and now it
should double down on that.
That's why Germany, what they've done in Giga Berlin, is so important.
So not only are Germans and Americans making Teslas,
they’re buying them too.
Over half a million were bought in the US last year,
but another big buyer is Sweden.
So, in these countries, where Teslas or parts for the cars are
made or serviced, there is unrest.
Like in Sweden, where workers are protesting.
Swedish Tesla mechanics have walked off the job, though their number is
small, the movement has sparked solidarity efforts across not only
Sweden, but also Denmark.
Dock workers are refusing to unload Teslas and for weeks the postal
service refused Tesla deliveries.
The Swedish mechanics want the company to sign a collective
bargaining agreement, which would let them negotiate for higher
wages, pensions and alike.
Workers’ rights are in issue in Germany too.
German media has reported numerous concerns among Giga-Berlin employees
about working conditions.
From the USA, especially from the CEO
probably comes a lot of pressure to deliver
numbers to produce cars and to sell those cars
and yeah, in-in the end to provide better numbers for the shareholders, right?
So, so that the stock goes up and he can buy another Twitter
or whatever he wants to.
Gunnar Hemmann is a member of the IG Metall Union in Germany and
was employed by Tesla.
Musk's company has so far blocked unionization at its factories, but
a works council is in place at Gigafactory Berlin.
The non-union nature's been part of the success of Tesla.
I mean, they're not
I wouldn't say have the overhang
at some of these other automakers have
by having unions
and that's really how Musk built it.
And I don't see that changing anytime soon despite UAW and others
that will go after them, but they go to the beat of a different drum
and that's been a big part of their success being non-union.
We wanted to know, what do the people who live in and near
Grünheide think about the factory and the working conditions?
If you get a lot of people in really quickly, it's going to be
a lot of stress for everybody.
It is difficult.
I mean, but I do think that it's like teething problems that will
solve be solved in the future.
Tesla made a worldwide profit of around 12 and a half billion dollars in 2022.
But what is the true cost of buying one of these futuristic,
cool all-electric vehicles?
Well, hosting a Gigafactory bring jobs, but also working conditions
that can lead to injuries like here in Germany.
A factory with such a large footprint can also strain local
resources and make regions experiencing drought face even
greater water limitations.
We did reach out to Tesla for interviews and for comment,
they did not respond to those requests.
Tesla has been an innovator for years, so, there’s still room to improve.
And water usage or workers conditions could actually be
another frontier that this American company confidently strides into.