Tesla charges into Germany

pCloud Premium

BERLIN — Tesla’s Elon Musk is storming Berlin with his electric car plans, but he’s hitting a market with powerful incumbent rivals.

Musk’s car company will build its fourth so-called Gigafactory, and first in Europe, just southeast of the German capital, churning out batteries, powertrains and finished vehicles, the entrepreneur announced Tuesday. “It is a milestone in the development of electric mobility and battery expertise,” Germany’s Economics Minister Peter Altmaier, who has championed a European battery industry, said Wednesday.

But unlike a few years ago, when the European car industry saw diesel engines as the best way to combat carbon emissions, the Continent’s carmakers are now pouring billions into going electric.

Tesla’s arrival in Europe won’t have the revolutionary impact Musk had in the U.S., where he essentially created the modern electric car industry. It’s also different from his move into China, where the company’s third Gigafactory opens this year and where Musk will be using the prestige of the Tesla brand to battle against lesser-known Chinese EV-makers battered by their government’s recent withdrawal of subsidies.

In Europe, deep-pocketed local companies with strong brands of their own — from Volkswagen and Daimler to Renault — are racing into the electric vehicle space. Tesla’s addition helps boost interest in EVs, but its cars will already compete with luxury battery-powered rivals like the Porsche Taycan and the Jaguar I-Pace, while VW’s ID.3 and Renault’s Zoe are aiming at the cheaper end of the market where Tesla doesn’t have much of a presence.

Tesla’s biggest European market is Norway, an outlier country that has used its oil and gas-fueled economy to heavily subsidize electric cars.

“I don’t think Germany is that far behind,” Musk said Tuesday.

Matthias Schmidt, an automotive analyst based in Berlin, reckons VW has no cause to panic, assuming Tesla’s new Berlin factory replicates the scale of its Chinese plant, which will produce 150,000 vehicles a year.

“VW’s converted facility down the road in Zwickau will produce 330,000 at full capacity with three more dedicated battery electric vehicle facilities to open in the next two to three years,” he said. “In a way it could even help German [automakers] with more EV producers here bringing down costs from a mushrooming supplier base.”

Tesla’s biggest European market is Norway, an outlier country that has used its oil and gas-fueled economy to heavily subsidize electric cars. The Tesla Model 3 is the best-selling car there, although VW’s Golf (mostly electric models) runs a close second.

Tesla co-founder and CEO Elon Musk | Philip Pacheco/AFP via Getty Images

That’s not the case in the rest of Europe. In the third quarter of this year, battery-powered car sales were up by 124 percent to 90,623 — but that’s still only about 3 percent of all new vehicle registrations, according to the European Automobile Manufacturers’ Association.

However, the EV shift is gathering pace.

“Competition has always meant better and faster,” said Ferdinand Dudenhöffer, a professor at the University of Duisburg-Essen. “So it’s good news for VW, Daimler and BMW. The decision of Elon Musk strengthens Germany.”

Germany and other EU countries are also pushing hard to expand their charging networks — German Chancellor Angela Merkel recently promised to have 1 million charging points by 2030. That is aimed at gaining market acceptance for EVs — crucial if the EU is to hit its emissions and climate targets.

Tesla teams have been scouting locations across Europe for a plant to meet local demand for premium e-cars for years.

“We share a vision that we only can achieve the CO2 targets and reduce carbon emissions through electric cars,” said VW CEO Herbert Diess, who shared a stage with Musk on Tuesday night when the Tesla chief picked up an award from German tabloid Bild.

Diess thanked Musk for “pushing us” but then added, “I think that German industry is really strongly investing and we will keep you alert.”

Tesla hunts for a home

Tesla teams have been scouting locations across Europe for a plant to meet local demand for premium e-cars for years. Tesla wasn’t always so keen on Berlin, with reports the company was interested in sites in western Germany near France, Belgium and the Netherlands.

Musk said he scratched the U.K. from the list thanks to Brexit.

The decision means thousands of new jobs in the German capital, which will house a separate Tesla design center, and the surrounding region of Brandenburg in which the car plant will be located. It offers the potential to supercharge growth in a historically deprived region. Ramona Pop, Berlin’s top economy official, told RBB radio Wednesday that the move could create 6,000 to 7,000 new jobs.

The surprise announcement, coming just days after the capital celebrated 30 years since the fall of the Berlin Wall, promises to bring back some of the industrial heft the city lost during the Cold War.

While the German car industry is confident it can handle the Tesla challenge, Musk sees an opportunity thanks to the country’s traditional dominance of the internal-combustion engine.

“I don’t think Germany is that far behind [on e-mobility], but it’s always difficult when there is a lot of momentum around an old technology,” said Musk of fossil fuel cars in Berlin. “There’s a lot of infrastructure and capital tied up in the older technology.”

This article is from POLITICO Pro: POLITICO’s premium policy service. To discover why thousands of professionals rely on Pro every day, email pro@politico.eu for a complimentary trial.

pCloud Premium

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.