• February 4, 2023

What Will Tesla’s New German Gigafactory Mean For Germany’s Auto Industry? : NPR

A street sign says “Tesla Street 1” in front of the construction site of the Tesla Gigafactory near Berlin. The electric car maker plans to start building cars at its first European manufacturing facility this summer. Michael Sohn / AP hide caption

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Michael son / AP

A street sign says “Tesla Street 1” in front of the construction site of the Tesla Gigafactory near Berlin. The electric car maker plans to start building cars at its first European manufacturing facility this summer.

Michael son / AP

Seven years ago Mathias Döpfner attended a ceremony to celebrate Tesla founder Elon Musk. Döpfner, the head of the German media company Axel Springer, sat next to a CEO of one of the largest German automobile manufacturers. He turned to him and asked, “Isn’t this guy dangerous for you?”

As he told laterThe CEO shook his head. “These people in Silicon Valley have no idea about technology, about building really beautiful and great cars,” said the CEO. “So we don’t have to worry.”

At that time, Tesla shares were worth $ 23 billion, a quarter of the value of Germany’s largest automaker, Volkswagen. But the times have changed. Teslas Market capitalization has risen to over 700 billion US dollars, more than three times as much as Volkswagen, Daimler and BMW – the three largest German automakers – combined.

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To make matters worse for Tesla’s German competitors, Musk is overseeing the finishing touches on his company’s latest project – Tesla’s newest gigafactory in a city southeast of Berlin.

Electric car maker Silicon Valley plans to start building cars outside of the German capital this summer, which threatens to change traditional German car culture for internal combustion engines. When the Gigafactory Berlin-Brandenburg opens later this year, Tesla will produce batteries, drives and ultimately 500,000 electric vehicles per year.

“In three months there will be a new road, four lanes, a bicycle tunnel, a new motorway exit and a new train station here outside the factory,” says Arne Christiani, Mayor of Grünheide, the town with 9,000 inhabitants in a forest.

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Tesla’s Gigafactory promises to transform the sleepy settlement into one of the largest factory cities in Europe. 40,000 workers, an estimated half of whom commute from Berlin, about 32 km away.

“At the end of each financial year, I had to apologize for 16 years in a row for our city’s balance sheet and for the fact that we did not manage to create high-quality jobs in the region,” says Christiani. “Now that we have the opportunity to do so, no less during a pandemic, this is a once in a lifetime opportunity for me.”

This is Tesla’s fourth Gigafactory – after Reno, Nevada, Buffalo, NY, and Shanghai – and the company’s first in Europe. Musk chose Grünheide from other options across Europe because of its location – right on the autobahn, on a railway line and close to the new Berlin airport – and because construction would go quickly: two decades ago, the city had plans for a BMW automobile plant approved, that was never built.

The new factory is not the only thing that Tesla finds easy in Germany. Earlier this month, Germany named Tesla one of eleven companies operating in the country to receive billions of dollars in government subsidies to increase battery cell production.

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“There is a massive movement underway within Europe to move to a carbon-free economy by 2050,” says Christiaan Hetzner of Automotive News Europe.

According to Hetzner, the European road transport sector causes a fifth of the continent’s CO2 emissions, and German car manufacturers, who specialize in large, heavy SUVs and sedans, are falling behind in reducing emissions from their fleets.

“If they do not achieve their goals, they face fines that are so high that they could bring entire companies or entire companies out of business,” says Hetzner.

Last year, Volkswagen missed its CO2 emissions target for its car fleet by only 0.5 grams per kilometer and had to pay the EU a $ 121 million fine.

“If you miss it by several grams and have a significant fleet, you are probably talking about at least a billion fines that a single company would simply have to pay to the European Union,” says Hetzner.

Fiat Chrysler Automobiles two years ago before bankruptcy When the EU threatened a fine of US $ 2 billion for having too much CO2 emissions from its vehicle fleet. Instead, the company has signed a deal with Tesla to merge its fleets and cut Fiat Chrysler’s emissions. The deal ensured Tesla would receive hundreds of millions of dollars annually – enough to fund its German gigafactory – and Fiat Chrysler was saved from bankruptcy.

This is a lucrative business for Tesla. The company did $ 3.3 billion in the past five years from eleven US states that, like the EU, are forcing automakers who cannot meet emissions reduction targets to buy loans from companies like Tesla. However, this source of income promises to dry up in the coming years as EU automakers ramp up their electric vehicle fleets.

According to Hetzner, the largest German car manufacturers are forced by EU laws to ramp up the production of battery-electric vehicles and plug-in hybrids. However, it has taken them years to get there and they are struggling to meet the EU’s emissions reduction targets.

Birgit Dietze of IG Metall, Germany’s auto workers’ union, says that since Tesla’s entire fleet is electric, the company is already ahead of its German competitors.

“Tesla has a small advantage because it doesn’t have to switch from using old technology to new technology, but immediately starts using new technology. This simplifies things a bit,” says Dietze.

What may not turn out to be so easy for Tesla will be adapting to German trade union rules. In the U.S., Tesla workers have filed complaints about low wages and poor working conditions, and Musk has resisted their union formation efforts. But IG Metall is a powerful force in Germany. In 2018, it was given the right to a 28-hour work week and a 4% raise for its industrial workers after a series of strikes that cost German automakers millions of dollars.

“We expect Tesla to comply with German labor law and we are confident that this will be the case,” says Dietze.

Tesla did not respond to interview requests from NPR.

Back at the Gigafactory construction site, Mayor Christiani is confident that everything will work out – for Tesla and for his city. He says the Germans, who are among the world’s greatest car enthusiasts, can’t wait for the factory to start operating.

“On the weekends, we can already see Tesla tourism here. Regardless of the weather, fans come from all over with cameras to document the construction of the factory,” he says.

Christiani drives an Audi exhibited from work with an internal combustion engine. He is not sure whether the city will switch its fleet to Teslas. But if they do, he says, they’ll make sure they’re built here.

Esme Nicholson contributed to this story from Berlin.

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