Tesla Berlin set to disrupt German Carmakers

Tesla Berlin set to disrupt German Carmakers

With Tesla’s Giga Berlin nearing completion, production is expected to start in the summer and could disrupt upend Germany's traditional combustion engine car culture.

Seven years ago, Mathias Dopfner, head of the media company Axel Springer that presented an award to Elon Musk last year, asked a CEO of one of Germany's biggest carmakers if thought Tesla would become a threat. At that time, the CEO replied, “These guys in Silicon Valley - they have no clue about engineering, about building really beautiful and great cars. So, we don't have to worry.”

However, a lot has changed in seven years. Tesla's market cap is now sitting at more than $800 billion, which is three times the value of Daimler, VW, and BMW put together. All three are Germany's largest auto manufacturers.

When Giga Berlin opens this year, it’s going to not only produce Tesla vehicles, but drive trains and batteries. What’s more, in true Musk style, the German Giga Factory is supposedly going to have a “mega rave cave” under the factory, which will boast an “epic sound system and woofers the size of a car”.

In order to accommodate the factory workers and access to the plant, the area around the facility will have a new four-lane road, a bike tunnel, a new highway exit, as well as a new train station.

Tesla’s move to Grunheide, which is near Berlin is set to transform the town that has a population of 9,000 people. The town’s mayor, Arne Christiani said in an interview last year:

“At the end of every fiscal year for 16 years in a row, I've had to apologize for our town's balance sheet and for the fact that we failed to bring high-quality jobs to the region. Now that we have the opportunity to do so during a pandemic, no less, is a once-in-a-lifetime chance for me.”

Giga Berlin is Tesla’s fourth Gigafactory and first one for Europe. Tesla CEO, Elon Musk chose the location well making sure it was near the autobahn, on a train line and near Berlin's new airport.  At the start of the millennium, plans were approved for BMW to build a plant in the same location but construction never happened.

Earlier this month, Tesla got good news from Germany when the government announced that Tesla would be one of eleven companies that will get substantial subsidies aimed at increasing battery cell production. Europe is on a big drive to transition to a zero-carbon economy by 2050 and Tesla is set to be a massive contributor.

For those German automakers who specialize in the heavy, big SUVs and sedans will be losing out on the credits and incentives offered and if these companies don’t achieve the environmental targets they’ve been set, then they could face considerable penalties that will dent their bank balance.

Last year, Volkswagen didn’t make its carbon emissions target and the EU penalized the car maker with a $121 million fine. And, two years ago, Fiat Chrysler was another auto manufacturer that nearly faced bankruptcy after the EU threatened a $2 billion fine as its fleet's carbon output was far too high. With Tesla’s entire fleet being all-electric, it is already far ahead of its competitors in Germany in reaching zero-emission targets and the US-based car maker doesn’t have to do any work or fork out major investments to shift from old technology to the new electric technology.

The only new aspect that Tesla will have to learn and implement is adjusting to Germany’s union rules. This will be something Tesla will have to get right when it comes to working hours and minimum pay. Dietze's IG Metall is a force to be reckoned with and she won a 4% pay raise for industrial workers in 2018.

The town’s mayor seems confident that Tesla will adhere to what’s required. He also seems more than thrilled at Tesla getting up and running and said they are already seeing Tesla Tourism where people flock to the area just to get a look at the new Gigafactory.