Tesla Gigafactory Berlin Is Opening!
Tesla’s GigaFactory in Berlin Germany has been showing some incredible signs of life in recent days, and Tesla news out of Germany is ramping up as well. We’ve got indications that final approval from the German government might come any day now, Model Y production forecasts into the first half of 2022, more protests, as usual and some interesting confusion around EU funding and battery manufacturing. So let’s talk about it.
Giga Berlin Opening
Our first good look at the Giga Berlin factory came all the way back on October the 9th, when Tesla held their open house event and allowed the public in to take a look at what they’ve been working on. And even nearly two months ago now, the factory looked great, it looked ready to get going.
At that event, Elon Musk said that he expected production to begin as early as November and no later than December. Of course, at the time, he didn’t know that a technicality in the German consultation process would throw at least another month of delay into that plan. And while we didn’t really get any new activity in November, Elon could still be right about December.
We’ve got news that final approval for Giga Berlin might be coming any day now, and that the first Model Y’s have already been produced. Just as a refresher, because German procedures are so bizarre, Tesla have been doing all of their construction work so far on a kind of preliminary approval basis. The government was allowing Tesla to go ahead with the work, but reserved the right to put a stop to the whole thing at any time and can delay the official opening by as long as they choose. Technically, there is still a chance that the Germans can reject the entire project and make Tesla deconstruct the entire factory. That’s not going to happen, but for whatever reason, it is still an option on the table. It’s also fair to say that Elon himself underestimated the German tendency towards excessive bureaucracy, remember that Elon had been expecting production to begin sometime in July of this year. And it’s pretty clear that his patience with government oversight is running thin - more on that in a bit.
Anyway, the latest reports from German media outlet, Automobilwoche, say that Tesla will begin series production at the GigaFactory in Grünheide in December. And that the approval of the Brandenburg State Office for the Environment is now expected to take place in the coming days.
The German report goes on to say that Tesla has also produced 5 ‘validation’ units of the Model Y - though it also states that this production did not take place on the production line - Whatever that means. A few Model Y vehicles were spotted around the factory in the third week of November and they were even making rounds of the facility’s test track. So even if we don’t know exactly what the significance of that is, it definitely seems to be a good sign.
We’ve also got some estimates on the initial production rate for Giga Berlin. Again, this is coming from German media reports, and they’re claiming that serial production will start slowly in December and begin January with a rate of about 1,000 cars per week and gradually increase from there. These reports forecast 30,000 vehicles produced at Giga Berlin in the first half of 2022.
This sounds low at first, but it tracks with what Elon was telling us at the GigaFest even back in October. During his presentation Elon said, "Starting production is nice, but volume production is the hard part. It will take longer to reach volume production than it took to build the factory.”
This is something that we hear really often from Elon Musk - building a small number of things is very easy, but manufacturing at scale is exponentially more difficult. At that time, Elon was projecting volume production would amount to 5,000 vehicles per week and hopefully go as high as 10,000 per week in the future. He also forecasted that battery cell production at the plant would reach volume by the end of next year. And just for comparison, it took about a year and a half to build the factory, so going on Elon’s timeline, which is almost always wrong, that 10,000 cars per week should hit in about 2 or 3 years from now. If we look at Giga Shanghai, it took them about one year to build the factory and about a year and a half to reach volume production.
Objections
Of course, things are done much differently in Germany, as we now know very well. The most recent delay in approval for Giga Berlin came in late October, when a procedural technicality rolled the approval process backwards by a month. German authorities decided to repeat a public consultation process that had already been done last year. But many, so-called environmental groups, managed to successfully argue that the public weren’t given a long enough advance notice about the consultation period and therefore a do-over was required. I think it amounted to there being 5 days notice instead of 7 days notice, which sounds trivial at best to me, but not so much in Germany.
The do-over consultation period ended on November 22nd, and over a week later, we still haven’t heard of anything significant coming from it. That hasn’t stopped the protesters from promising to continue fighting tooth and nail against this, but it certainly looks like they’ve run out of ammunition at this point. These people act like they’re Captain Planet and the Planeteers, but I’m pretty sure they’re just goons hired by BMW and Mercedes. In my opinion of course, but until I see them manifest an environmental superhero with magic rings, then I’m not convinced.
And just for the record, the land that Giga Berlin was constructed on is not a natural environment, that’s a man made forest surrounding it, that’s why all the trees are identical and perfectly spaced like Elon Musk's transplanted hair line. It’s a cardboard box farm - the whole forest was planted with the intention of clear-cutting it and making cardboard. So in terms of environmental impact, which one is worse, really? At least Tesla is committed to replanting more trees than they cut down and creating new, mixed growth forests that will stand up better to changing climates.
Anyway. It’s now reported that Brandenburg’s Office of the Environment finished online meetings about Giga Berlin’s full approval last week. About 800 objections from environmental associations were discussed during the meetings. After the process, Brandenburg's Economics Minister Jörg Steinbach stated that he was confident that Giga Berlin would produce its first Model Y by the end of 2021. Steinbach has been a strong supporter for Tesla this whole time and he’s proven to be a trustworthy ally, so if he’s happy with the results then that is a very good sign.
Government Subsidies?
Then there’s this whole matter of government funding for the Giga Berlin battery plant. This is a bit of a weird one. TEsla applied for additional funding from the European Union to help fund their battery cell manufacturing at Giga Berlin. The EU has a ton of money put aside to aid domestic battery manufacturing in Europe, they specifically want to curb the number of batteries that are being imported from China. In January, the EU approved a plan that would grant state funding to Tesla, BMW and others to support EV battery manufacturing. Tesla was expected to receive over 1 billion Euros, that would amount to around 1 point 3 billion US dollars. A final decision on the funding was expected by the end of this year - except Tesla have just informed the German Ministry of Economics that they are withdrawing the application for funding.
That’s a lot of money to just walk away from. Elon Musk wrote on Twitter about the decision, "It has always been Tesla’s view that all subsidies should be eliminated. But that must include the massive subsidies for oil & gas. For some reason, governments don’t want to do that..."
It’s definitely fair of Elon to say. Oil and gas subsidies in the United States alone last year accounted for around 20 billion dollars - and that’s pretty annoying when we are seeing the negative effects of those fossil fuel emission on a near daily basis. Canada is getting wrecked by extreme weather this year, it’s already reached disaster levels and only getting worse. I think Elon is also sensitive to the fact that Tesla detractors are addicted to this made up narrative that they are only successful because of government subsidies - which isn’t true, you can look at any of Tesla’s financial statements for the past two years and debunk that one. It’s also laughable when you remember that General Motors, the apparent ‘leader in electric vehicles’, wouldn’t have survived past the year 2009 without massive amounts of money coming from the US government. We’re talking about 80 billion dollars of American taxpayer money being transferred to GM. Oh and Chrysler got some of that too - not sure what they did with the money, probably spent it on muscle cars and cocaine, but they’re harder to be mad at, they don’t try to be anything they’re not - Dodge have embraced being the official brand for creepy, divorced dads with a midlife crisis.
Anyway. There’s also a report going around that Tesla might have been forced to retract their funding application. Elon’s tweet might be a smoke screen for something a little bit more complex. A Financial Times report claims that due to delays in opening the battery factory, Tesla was unable to meet the EU conditions. There is some stuff in this report that makes sense and some that doesn’t, so bare with me.
Apparently, the EU requires any sites in receipt of the funds to be the “first industrial deployment” of the technology in question. Which in this case would be the Tesla 4680 battery cell. The Financial times insinuates that because of the delays in Germany, Tesla is likely to begin producing the batteries elsewhere sooner. Which is a stupid thing to say becuase we know that Tesla have been producing these batteries in California for well over a year - they showed us this video of the battery production line chugging away back in September 2020, so it must have existed long before then. Which would seem to suggest that Tesla never actually qualified for this funding to begin with. So, to say that delays or supposed environmentalists had anything to do with it is just BS.
Either way, it doesn’t particularly matter. A billion dollars is not a small amount of money, but for a company with a valuation now over 1 trillion, it’s not exactly anything to worry much about. Tesla has said that this does not affect their plan for construction of the battery plant in any way. And we knew back in October that Tesla had plans to invest 5 point 8 billion dollars or 5 billion Euros of their own money into the Berlin battery plant and expect to reach 50 gigawatt hours per year in cell capacity.
One last small but significant piece of news that points to Giga Berlin mass production coming soon - Tesla have begun recruiting students to work as End of Line Drivers at the factory beginning in January. The job is basically just to drive cars around the factory and park them wherever they need to be. Mostly from the final assembly area to the parking lot. But the fact that Tesla is hiring a bunch of kids with the promise to begin work in January indicates that there will be plenty of cars on site that will need to be parked.
This is going to be such a game changer for Tesla in the international market - they’re already taking over North America and Asia but this opens up the rest of the world. Tesla went from shipping cars all the way from California to Europe, to now shipping cars from China to Europe, and in a month they’ll be building cars in Europe. And all of this progress has come in about 2 years. It’s amazing just to watch this company grow.