This week marks the formal opening of U.S. headquartered electric vehicle auto maker Tesla’s newly constructed production facility located in Gruenheide, Germany, just outside of Berlin.

Yesterday, in grand opening ceremonies, Tesla CEO Elon Musk and German government officials celebrated the event which included the handover delivery of an initial 30 Tesla Model Y performance vehicles costing a reported 63,990 euros to select European customers.

The newly opened $5.5 billion auto production facility, which received full approval from German regulators on March 4th, has a full capacity of 500,000 vehicles annually. Reportedly, the facility staffing now includes 3,000 workers, with full capacity expected to employ upwards of 12,000 workers.

The facility itself was originally scheduled to open eight months ago, but opposition was encountered from environmentalists regarding high water usage and concerns related to added air pollution. In the interim, European vehicle production needs were sourced from Tesla’s Shanghai, China production facility.

Current plans call for volume production to begin in April. In its reporting of the opening, Reuters cited estimates from JP Morgan indicating that the facility would likely produce upwards of 54,000 vehicles in 2022.

There is one significant caveat to this goal.

In late January, after reporting better than expected financial results, CEO Musk warned investors that the electric automaker would be challenged by supply network issues, including availability of semiconductor devices throughout 2022. Further announced was that the company will not introduce any new vehicle models this year. That would likely include the long-anticipated Tesla Class 8 semi-truck introduced in 2017 and the Tesla Cybertruck pick-up vehicle. Instead, the emphasis in 2022 was noted as scaling output and boosting deliveries by more than 50 percent by the end of this year, estimated by FactSet to amount to upwards of 1.5 million vehicles globally. As The Wall Street Journal has noted, the key to this enhanced delivery performance will be the operational output of the two newest production facilities, that of Germany and that of Austin, Texas.

As for the European market, Reuters pointed out that Volkswagen now has a 25 percent EV market share across Europe, compared with Tesla’s reported 13 percent market share. The Germany based automaker is planning for a 2-billion-euro EV production facility adjacent to its Wolfsburg production complex, along with six battery production plants across Europe.  European based luxury automakers BMW and Daimler have aggressive EV production plans for the continent, as are other global based automakers.

Supply Chain Matters is of the perspective that given the implications of the ongoing Ukraine conflict’s implications on Europe and global energy markets, EV production plans across the EU may well have added urgencies and accelerated timetables in the months to come.


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