Brexit uncertainty means Tesla chose Germany for new European factory

5 minute read
03 December 2019


Last month, Tesla CEO Elon Musk said that Brexit uncertainty was a factor in the firm's decision to build its first major European factory near Berlin in Germany rather than the UK.

After making the announcement at an auto industry awards ceremony, Musk told Auto Express magazine that: "Brexit (uncertainty) made it too risky to put a gigafactory in the UK."

The firm plans to make batteries and start Model Y and III production there as well as undertaking research and development.

Musk made a nod to German engineering talent, noting that "some of the best cars in the world are made in Germany. Everyone knows that German engineering is outstanding, for sure, and that's part of the reason why we are locating our gigafactory Europe in Germany. We are also going to create an engineering and design centre in Berlin."

Production in Germany is expected to begin in 2021 - although the firm has a habit of missing start dates. Musk told the award audience: "I come to Berlin a lot - Berlin rocks!"

Berlin is also a major tech centre in its own right and Tesla is as much a tech firm as it is an auto maker - think of the firm's frequent software updates that extend the capabilities of Tesla cars and enable increasingly automated driving.

Tesla currently has a (very) final assembly factory in Europe, in Tilburg, Netherlands, which assembles the Model S and Model X for European markets using parts shipped over from the US.

Having a full-blown European assembly facility - like other auto firms - has been a Tesla goal for a while and should help boost sales in a rapidly expanding European market for electric vehicles.

It was previously thought that the UK was at least in the running to land a Tesla plant.

Back in 2014, speaking at the handover of the first right-hand drive Model S cars to British drivers, Musk said that the UK could be the base for a new research and development centre and possibly an assembly plant, saying that: "it makes sense to have (a factory) in the UK once we're producing more than 500,000 units… I'd say Model S is more European than American in design and handling. Most of the set-up work was done by British guys".

And Musk had previously commented on the strength of motor sport - especially F1 - in the UK and further hinted that Tesla could do something in the UK.

Speaking to The Telegraph back in 2016, Musk said: "We have a lot of respect for… British automotive engineering talent. Just look at Formula 1 - it amazes me how much British talent there is in that. We are likely to establish a Tesla engineering group in Britain at some point in the future."

That fuelled hopes for some sort of research and development centre here or even assembly if and when Tesla chose to invest in Europe.

Such hopes have been dashed with the decision by Tesla to invest big time in Germany.

In reality it comes as little surprise that Tesla didn't really consider the UK as a location, despite some excellent work here on research into battery technology.

Why is that?

First, Brexit uncertainty has stymied investment in the auto industry, which is down by over 80% in the last three years. The longer that uncertainty goes on the higher the risk the UK misses investment in the new automotive technologies that are coming.

Second, despite the Tesla Model III hitting the UK best sellers list in August, the UK is lagging other European countries in take up of electric vehicles.

Partly that is down to the government cutting subsidies for electric vehicles prematurely, just as they are being increased in the likes of Germany.

Furthermore, much more generous and wide ranging support is available in countries like Norway where 50% of new car sales are electric.

Also the UK's charging infrastructure is patchy across parts of the country and needs much more investment in next generation super-fast chargers.

In contrast, the German government is committing big support for take up of electric vehicles in coming years.

Musk looked at where the big action and investment is taking place and concluded that it isn't in the UK, sadly.

That - like the Honda decision to pull the plug on its UK operations - blows something of a hole in the UK government's industrial strategy for the automotive sector, which is about shifting towards an electric future.

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