Tesla Motors in Discussion with German Government Over European Gigafactory, Says German Politician

When fully completed some time next year, the massive Tesla Motors [NASDAQ:TSLA] Gigafactory in Reno, Nevada will officially become the world’s largest lithium-ion manufacturing facility in the world, producing more lithium-ion battery cells per year than the three next-biggest lithium-ion factories combined.

Tesla's first Gigafactory brought prosperity to Reno, NV. Now it could do the same in Germany.

Tesla’s first Gigafactory brought prosperity to Reno, NV. Now it could do the same in Germany.

Yet Tesla Motors CEO Elon Musk has always been open about the fact that one Gigafactory site won’t be enough to help Tesla move the world off fossil fuels. Indeed, at the launch event for Tesla’s PowerWall and PowerPack storage products this spring, Musk described the Tesla Gigafactory as a ‘massive product’ which would need to be duplicated around the world in large volumes by both Tesla and other companies in order to move the world off fossil fuels for good.

At that event, Musk hinted that Tesla’s first Gigafactory — Gigafactory 1 — would be the first of many Tesla-owned Gigafactory facilities around the world, with construction on subsequent Gigafactory sites following the first.

Tesla's Massive Gigafactory will eventually have siblings -- one could be in Germany.

Tesla’s Massive Gigafactory will eventually have siblings — one could be in Germany.

Now it appears Tesla is already eying up a suitable location for Gigafactory 2 — in Germany.

The news comes courtesy of Sigmar Gabriel, Germany’s Economy Minister, who told Bloomberg this morning at an event a Mercedes-Benz’s car factory in Rastatt, Germany that Tesla has been in discussions with the German Government about building a Gigafactory there.

“We’re in talks,” said Gabriel of discussions between the German Government and Tesla Motors CEO Elon Musk. “I assume he will want public funds.”

But while the German politician says Germany is on the list as a host nation for a future Gigafactory site, Tesla is playing down the possibility. In an email to Bloomberg, local Tesla spokeswoman Kathrin Schira said that Tesla has “no current plans to build a battery factory in Germany.”

While Tesla isn’t confirming the rumor right now however, there’s still a high degree of plausibility for a potential Gigafactory in Europe.

You see, while Tesla had originally planned the original 1,000-acre Gigafactroy 1 facility would produce around 50 Gigawatt-hours of battery packs per year, enough to power some half a million new Tesla cars per year, demand for the Tesla Energy static energy products has been extremely high ever since Tesla first unveiled them back in the spring.

Tesla needs a lot of lithium-ion cells. A German Gigafactory makes sense.

Tesla needs a lot of lithium-ion cells. A German Gigafactory makes sense.

Demand was so high in fact that Tesla decided to double the size of the Gigafactory site in order to build in extra capacity for even higher battery production volume, and even then, with demand for Tesla Energy products higher than anyone had predicted, Tesla still won’t be able to produce enough lithium-ion cells at Gigafactory 1 to meet demand.

Naturally, demand is higher in some markets than others, and based on pre-orders and commercial enquiries, Germany will be one of Tesla’s key markets for PowerWall and PowerPack products, thanks to the nation’s healthy solar industry.

That’s not all. With a Gigafactory in Europe, Tesla would be able to regionalise production of its Model X and Model S electric cars, dramatically reducing financial and environmental costs of production. Already, Dutch, Belgian, French and German-market Tesla Model S cars receive their final assembly at Tesla’s Tilburg facility in the Netherlands. Replacing a U.S.-sourced battery pack for a regionally-produced one would dramatically slash costs.

When the Tesla Model 3 launches — a high volume mass-market car which Tesla says will sell for around $35,000 — Tesla hopes to open a number of different factories around the world to produce regional-market Model 3s from scratch. A Gigafactory located locally to each facility would again represent massive cost reductions and help insulate Tesla from any open-market fluctuations caused by exchange rates between different currencies.

As it was with the first Gigafactory, it seems Tesla wants to keep any preliminary discussions surrounding Gigafactory 2 a closely-guarded secret. But of all the rumors we’ve heard about the Gigafactory this one — and talk of a Gigafactory in China — seem to make the most sense.


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