Dancing Musk hands drivers the first Teslas from the new German gigfactory

GRENHEIDE, Germany, March 22 (Reuters) – Elon Musk was thrilled as he supervised the delivery of a Tesla. (TSLA.O) The first German-made cars arrived at its plant in Gruenheide on Tuesday, marking the US automaker’s inaugural European position just two years after it was first announced.

Loud music played as 30 customers and their families got their first glimpse of their gleaming new cars through an alluring, neon-lit Tesla-branded tunnel, clapping and cheering while Tesla CEO Musk danced and joked with fans.

“This is a great day for the plant,” Musk said, calling it “another step toward a sustainable future.”

Musk said Tesla is likely to launch a test version of its new “fully autonomous driving” program in Europe, possibly as early as next year depending on regulatory approval.

“It’s very difficult to do fully autonomous driving in Europe,” he told factory workers on Tuesday, adding that a lot of work needs to be done to deal with difficult driving situations in Europe where roads vary a lot by country.

Although German Chancellor Olaf Scholz, who also attended the event, hailed the giant plant as the future of the auto industry, he faced opposition and some environmental activists blocked the entrance to the plant while displaying signs indicating its high water consumption. Read more

Two protesters retreated from a sign on the highway near the factory, blocking traffic for hours after the event.

Musk had hoped to start production from the plant eight months ago, but licensing delays and local concerns about the plant’s environmental impact have hampered the process.

Tesla had to serve European orders from Shanghai while it waited for its German license, driving up logistics costs at a time when it was grappling with an industry-wide chip shortage and other supply chain disruptions.

It got the final green light from local authorities on March 4 to start production in Germany, provided it meets conditions ranging from water use to air pollution control.

The factory opening came on the same day that the largest US securities regulator urged a federal judge not to allow Musk to back down from an agreement requiring monitoring of his Twitter use. Read more

Tesla shares closed 7.9% higher at their highest level in more than two months on Tuesday.

Racing with Volkswagen

New owners received a Model Y Performance configuration, a car that costs 63,990 euros ($70,500) with a range of 514 kilometers (320 miles), Tesla said, adding that new orders from the factory could be delivered from April.

Tesla said about 3,500 of the plant’s expected 12,000 workers have been hired so far.

At full capacity, the plant will produce 500,000 cars a year, more than 450,000 battery electric cars from German rival Volkswagen. (VOWG_p.DE) Sold globally in 2021.

It will also eventually generate 50 GWh of battery power, surpassing all other plants in Germany. Tesla is expected to initially import batteries from China for its German-made Model Ys before it begins domestic battery production.

Musk said on Tuesday that battery production will be a “challenge” next year and the “defining factor” in the coming years, as Tesla aims to boost auto production aggressively.

For now, Volkswagen still has the inside track in the race to electrify Europe’s fleet, with a 25% market share versus Tesla’s 13%. Musk said it would take more time to ramp up production than the two years it took to build the plant. Read more

JPMorgan predicts that Gruenheide will produce about 54,000 cars in 2022, rising to 280,000 in 2023 and 500,000 by 2025.

Volkswagen, which received 95,000 electric car orders in Europe this year, is planning a new €2 billion electric vehicle plant along with its existing facility in Wolfsburg and six battery plants across Europe.

But its schedule is behind Tesla’s, with an EV plant due to open in 2026 and the first battery plant in 2023.

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(Additional reporting by Victoria, Al-Darsi and Nadine Chemrosec.) Editing by Alexander Smith, Jean Harvey and Richard Boleyn

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