Tesla hands over first Model Ys as $5.5 bln German gigafactory finally goes live

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Tesla will on Tuesday hand the first Model Y cars made at its 5 billion euro ($5.5 billion) Gruenheide plant to clients, launching its first European production hub with the biggest investment in a German car factory in recent history.

German Chancellor Olaf Scholz will attend Tuesday’s ceremony alongside Tesla Chief Executive Elon Musk, marking a moment Musk had hoped would happen eight months ago but local authorities say has come comparatively quickly for a project of its size.

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The opening comes as Musk has flagged Master Plan Part 3 for Tesla, which he said will map out scaling Tesla to “extreme Size.”

With plans to hire 12,000 workers, the German gigafactory and adjacent battery plant will become the biggest employer in the German state of Brandenburg, where it is based.

At full capacity, it will produce 500,000 cars annually -- more than the 450,000 battery-electric vehicles that main rival Volkswagen sold globally in 2021 -- and generate 50 gigawatt hours (GWh) of battery power, surpassing all other plants in the country.

For now, Volkswagen holds the upper hand in Europe’s electric vehicle market, with a 25 percent market share to Tesla’s 13 percent. Musk has warned that ramping up production will take longer than the two years it took to build the plant.

JPMorgan predicted Gruenheide would produce around 54,000 cars in 2022, increasing to 280,000 in 2023 and 500,000 by 2025.

Volkswagen, which has already received orders for 95,000 battery electric vehicles in Europe this year, is planning a new 2 billion euro EV plant alongside its Wolfsburg factory and six battery plants across Europe.

But its timeline lags Tesla’s, with the EV factory to open in 2026 and the first battery plant in 2023.

Tesla received the final go-ahead from local authorities on March 4 to begin production, provided it met several conditions on issues including water use and air pollution control.

The carmaker came close to losing its water supply contract when local environmental groups filed a complaint against the environmental ministry challenging the license it granted to Tesla’s water supplier.

The court ultimately ruled that water extraction could go ahead, provided the ministry conducted a new public consultation.

The environmental groups may appeal the decision. Even if they don’t, citizen initiatives have said they stand ready to oppose Tesla’s planned expansion, citing everything from light pollution to water concerns.

Read more: India wants Tesla to buy $500 mln of local auto parts, as carmaker seeks tax cuts

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