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For a while now, I’ve been wondering how much Tesla is holding back on expanding its production capacity due to a lack of need for it. It seems Tesla has to roll out a series of incentives in order to stimulate more consumer demand quarter after quarter, and has had to do so for more than a year. The company’s sales actually dropped in the first two quarters of this year, and were barely up in the third quarter. We haven’t had news of new factories of big factory expansions lately, and based on those other trends, I wouldn’t expect them.
However, perhaps things will change again soon? The gears of bureaucracy move slowly, and one just clicked over. Perhaps it means nothing, but we’ll have to wait to see. The news is that the environment ministry covering the jurisdiction of Tesla’s German factory (aka gigafactory) has granted Tesla permission to build a new hall there, the beginning of big expansion plans for the plant. Tesla, eventually, has plans to double production capacity at the factory, and this is a key next step in the process.
“The approval granted permission for the carmaker to proceed with the first of three stages of the expansion, including construction of infrastructure for storage facilities, a battery cell test laboratory, and logistics areas,” Reuters reports.
Production capacity at Tesla Gigafactory Berlin is currently around 500,000 cars per year, and the aim is to raise that to 1 million cars per year, which would make it the largest auto production facility in Germany, which, of course, is one of the leading auto production countries in the world and has a handful of homegrown auto giants in-house. Volkswagen’s factory in Wolfsburg is currently the country’s largest auto factory, but Tesla’s gigafactory would surpass it in size (production wise) if it expands as desired.
There has been local opposition to the factory’s expansion for more than a year, which has included activists camping and even living in treehouses nearby. It must be an interesting life. Despite all of those protests and constestations, though, the local government has given Tesla permission to expand at last. Does that mean Tesla will rapidly expand? The company has an enormous amount of cash on hand, but is it wise to use it for this right now?
The application was submitted in July 2023, when Tesla sales growth was still strong, and well before Tesla saw its sales decline in 2024. At the time, the plan was to get new portions of the plant operational in the first half of 2024, which is now over. In the meantime as well, though, Germany abruptly removed big EV subsidies and the EV market in Europe’s largest auto market, which has led to struggles in Europe’s largest EV market. Plugin vehicles were 21% of the German auto market in September 2023, and they were just slightly better last month, in September 2024, reaching 23.7%. Reuters does add that, “the plant’s director, Andre Thierig, told German media in August that the company was waiting to invest until it was clear that demand for EVs, which has weakened in Europe, would pick back up.” So, it seems that even with this approval, Tesla may not do anything to get started on the expansion until the EV market picks up again. We’ll see, and we’ll keep you posted.
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