Tesla is coming to Germany

The announcement by the American car manufacturer Tesla that it intends to build a factory on the edge of Berlin next to the picturesque area of Grünheide am Peetzsee has been greeted with tremendous enthusiasm. How could this come about and what does it mean for German industry and the greater area of Berlin?

After 6 months of negotiations behind closed doors, the announcement in the middle of November came somewhat as an early Christmas present for Brandenburg: The next Tesla giga-factory for electric cars is to be built at this chosen location from 2020, with cars set to roll off the assembly line for the European market as early as 2021.

No doubt needing to search on Google Maps where this site is precisely located, the world’s press inevitably had to conclude: Not a badly planned location in strategic terms! In view of the German supply industry and European sales markets, there could hardly be a better site for a car factory. Located centrally between both western and eastern as well as northern and southern Europe, with good connections by road, rail and waterway and – if the new Berlin airport is ever completed – easy to reach from anywhere.

There was competition from other sites in Europe, but Tesla opted for the high level of skills and experience enjoyed by Germany in the area or automobile series production. Moreover, an industrial settlement can certainly be realised with favourable conditions and lucrative subsidies in the relatively sparsely populated region around Berlin. In this regard then, a well thought-out and strategically effective move as part of Tesla’s expansion in Europe. What does Germany and the Brandenburg region expect from an American car maker commencing production there? By and large, the media has reported about investments amounting to billions plus thousands of jobs, both sounding positive initially. But another important question is the extent to which the German economy will benefit from this in secondary terms. Above all, the supply industry, which has primarily been supplying German automotive manufacturers in the domestic market with everything they need for the development and series production of vehicles.
Can suppliers look forward to a potential new customer that is going to purchase some of the required components for the planned Tesla models regionally or nationally? Or will all the components be brought to Brandenburg from far and wide prior to assembly into finished cars there? The second variant is highly improbable. German car makers have led the way. Production facilities have typically been built in the USA, China or India over the past few years, almost always associated with a regional supply industry having become established around the plants. Despite the relentless pace of globalisation, it usually makes no sense to ship vehicle components half-way round the world. That takes time, costs money and entails uncertainties that nobody needs within the just-in-time processes involved in series production. It is therefore to be expected that Tesla will also forge links with German and European suppliers for many of the components required: Anyhow, it is already the case that German know-how and German components lie beneath the bonnet of every Tesla – the production and assembly lines having been set up with German expertise as well. Against this background, it can safely be assumed that a plant in Brandenburg, where a new Tesla model is set to roll off the assembly line, will not be supplied from the USA or China either.

Behind every metal and plastic part that is installed in a car there is usually a complex manufacturing process such as forging, stamping, forming or machining. An important element is of course surface technology. No matter whether components receive a final coating of paint or electroplating, the basic requirements for surface quality need to be created. Production steps such as deburring, grinding, polishing and blasting come into play here. Every production plant implements processes that are used to optimise edges, contours and surfaces after mechanical fabrication in order to meet the quality requirements of the automobile industry. Even though all possible mechanical components are not required in the same form in an electric car as in vehicles with a combustion engine, there are numerous functional parts and decorative elements with a high-quality surface. Here too, it will be important for Tesla to utilise proven supply chains and not totally reinvent the wheel, as it were. Especially as regards the ambitious timeline (production kick-off in 2021), it is necessary to establish the entire supply chain including Tier-1, Tier-2 etc. extremely quickly. Germany certainly has the potential, it’s simply a matter of coming across as self-confident and keeping up with the pace.

German automotive suppliers and those in neighbouring European countries are no longer at full capacity owing to falling sales figures for vehicles with combustion engines and are able to offer manufacturing capacities. To this extent, Tesla’s entry into the European market could offer the opportunity for a number of suppliers to remain in business through certain adaptations in their product portfolio during the transformation phase from petrol or diesel to electric cars.

Some see it as a frontal attack on German car makers, other take a more sober approach regarding it as a totally normal competitive situation that needs to be embraced so everyone can prove their true merit. For decades now, it has been perfectly common for manufacturers of products – irrespective of type – to form clusters where customers are concentrated. Only German car makers respond with the utmost sensitivity when they themselves are affected. You could easily be forgiven for assuming that Germany has lost some confidence in its own economy owing to the numerous crises and strategic errors.

To avoid falling into depression at this stage, German automotive managers should view the situation positively, true to the motto: "Competition is good for business".

And what counts for every supplier: Don’t delay in sending off your latest corporate presentation to Elon Musk!

Good Vibrations
by Dirk Gather
Contributing Editor MFN
and Managing Director of
surfaced GmbH, Germany
Tel. +49.3301.5232.0 
Fax +49.3301.5232.29
E-mail: dirk@mfn.li