Elon Musk was welcomed as he oversaw the handover of Tesla‘s first German-made cars at its Gruenheide plant on Tuesday, marking the beginning of the American automaker’s first European base just two years after its announcement.
30 clients and their families were greeted to loud music as they saw their shining new vehicles for the first time via a flashy, neon-lit Tesla-branded tunnel, clapping and cheering as Tesla Chief Executive Musk danced and joked with fans.
“This is a great day for the factory,” Musk said, describing it as “another step in the direction of a sustainable future.” Musk said that Tesla is likely to launch a test version of its new “Full Self-Driving” software in Europe, possibly next year depending on regulatory approval. “It’s quite difficult to do full self-driving in Europe,” he told factory workers on Tuesday, saying much work needs to be done to handle tricky driving situations in Europe where roads vary a lot by country.
Despite the fact that German Chancellor Olaf Scholz, who also attended the occasion, welcomed the gigafactory as the future of the car industry, it has been met with opposition, with some environmental activists blocking the factory’s entrance with banners protesting its high water use.
Two protestors abseiled from a motorway sign near the facility, causing traffic to be backed up for hours. Musk had wanted to start producing at the factory eight months ago, but difficulties in obtaining licenses and local concerns over the plant’s environmental impact slowed things down.
While Tesla awaited its German license, it was compelled to fulfill European orders from Shanghai, adding to rising shipping costs at a time when the company was struggling with industry-wide chip shortages and other supply chain issues.
On March 4, it received final approval from local authorities to commence production in Germany, subject to a number of criteria ranging from water usage to air pollution limits. The plant’s launch coincided with the top US securities regulator urging a federal judge not to let Musk back out of a deal that required his Twitter use to be monitored.
On Tuesday, Tesla shares were up 7.9% to their highest level in more than two months. Tesla said the new owners received the Model Y Performance configuration, which costs 63,990 euros ($70,500) and has a range of 514km (320 miles), and that new orders from the plant might be delivered as early as April.
So far, roughly 3,500 of the plant’s projected 12,000 workers have been hired, according to Tesla. When fully operational, the factory would produce 500,000 cars per year, far exceeding the 450,000 battery-electric vehicles sold globally by German rival Volkswagen in 2021.
It will also produce 50-gigawatt hours (GWh) of battery power, outperforming all other German plants. Before starting local battery manufacture, Tesla is anticipated to import batteries from China for its German-made Model Y.
As Tesla seeks to quickly accelerate vehicle manufacturing, Musk said on Tuesday that battery output will be a “challenge” next year and “the limiting factor” in the future years.
For the time being, Volkswagen has the upper hand in the race to electrify Europe’s fleet, with a 25% market share compared to Tesla’s 13%. Musk has stated that ramping up output will take longer than the two years required to construct the plant.
According to JPMorgan, Gruenheide would produce 54,000 cars in 2022, 280,000 in 2023, and 500,000 by 2025.
Volkswagen is planning a new 2 billion euro EV factory in Wolfsburg, as well as six battery plants around Europe, after receiving 95,000 EV orders in Europe this year.
However, its schedule lags behind Tesla’s, with the EV factory set to begin in 2026 and the first battery facility set to open in 2023.