Tesla’s CEO Elon Musk confirmed the construction of its Gigafactory 4 factory in the “Berlin area” last week. An industrial area in Grünheide is expected to be the final location. The North American company has already started to list jobs for the new factory; however, it is still too early to infer whether the Gigafactory will also produce battery cells or if it will initially just assemble cars and packs.
Construction is expected to begin in spring 2020 and the finished factory will go into operation at the end of 2021. Media reports expect the factory to create up to 10,000 jobs.
Although Berlin has been finally chosen as the preferred location, other countries and German regions were being considered previously. According to local government officials, Tesla was initially looking at Gigafactory sites in Lower Saxony and even the German French border.
The German Gigafactory will be the first in Europe and the fourth worldwide, joining those in California, New York, and Shanghai. While most German carmakers are speeding up their EV production plans, none of them have to date sold as many full battery EVs as Tesla.
The location of a Gigafactory in Germany poses a threat to the domestic auto industry, with Volkswagen CEO declaring publicly in October its respect to Tesla as a competitor: “Tesla is not niche. The Model 3 is a large-series model and they are one of the biggest manufacturers of electric-car batteries. We have a lot of respect for Tesla. It’s a competitor we take very seriously”.
Nevertheless, Volkswagen is replicating Tesla’s success through a dedicated EV platform (MEB) that will simplify the manufacturing process and improve vehicle specs while also reducing production costs. A joint battery cell factory with Swedish cell maker Northvolt in Salzgitter, Germany, will underpin Volkswagen’s EV production. The German carmaker has poured US$1Bn into the battery joint venture.
At the same time, Daimler and BMW are building on their electric offensive with their “EQ” and “i” electric programs; however, both are facing a cost dilemma when producing EVs. Daimler reported ahead of its capital markets day in November, a potential US$2.5Bn in extra costs. Most of that cost will be attributed to compliance costs to lower its European fleet CO2 emissions, which need to “dramatically decrease” next year according to Daimler’s sustainability report. Similarly, BMW will continue without a dedicated EV platform as EV demand remains uncertain and the company intends to produce both electric and combustion vehicles in the same existing platform. Oliver Zipse, BMW CEO, told Automotive News Europe recently: “Flexibility is key” [in car production] but “succeeding is staying profitable”.
Meanwhile, some of China’s largest automakers have suggested to Roskill that Tesla could become a disruptive competitor as “its brand image and technology are the best in the market”. At a time when the Chinese NEV industry is facing a sales drop amid decreasing subsidies, Tesla has become the first OEM to build a fully owned production facility. This means that Tesla won’t need to share its superior technology with a domestic partner, as has historically happened in the Chinese auto industry.
Overall, Tesla remains the world leading EV maker in terms of technology and brand equity. While BYD and the Renault-Mitsubishi alliance have sold an equivalent number of plug-in vehicles, none of them have mastered Tesla’s management of ultra-high-nickel content battery cells. The higher gassing of battery cells with nickel contents in excess of 60% often requires the use of thousands of small and sturdy cylindrical cells. The safe and efficient management of that many cells in a battery pack has proven a real challenge for Chinese and western carmakers to date. While more established carmakers may still have an advantage in the mass-production of vehicles, Tesla is proving capable of scaling its production too, both in volume and geographical reach.
More information on the market trends of lithium-ion batteries can be found in Roskill’s 3rd Edition of the Lithium-ion Batteries: Outlook to 2028 report published in April 2019.
Roskill’s Greenfield Battery Raw Material Projects for the 2020s report, which gives more detailed analysis on trends for the major raw materials of lithium-ion batteries (cobalt, graphite, lithium, manganese and nickel), was published in June 2019.