Tesla's European Gigafactory in Gruenheide near Berlin Making Progress Despite Coronavirus Setbacks

Factors Motivating Tesla's Internationalisation to Germany

Tesla Inc.’s first European car plant planned for Gruenheide near Berlin is making progress despite minor setbacks related to the coronavirus disruptions.

The U.S. carmaker should be able to start work on the foundation next month after having cleared trees at the factory site in the small town of Gruenheide and levelingthe ground for construction, Arne Christiani, the town’s mayor, said Wednesday.

“Work should be able to continue soon,” Christiani said, adding that the coronavirus isn’t expected to disrupt construction

because most of it is done with large machinery and few workers, allowing for distancing.

Chief Executive Officer Elon Musk is pursuing an ambitious timetable by targeting mid-2021 for the plant to start production. Demand for Teslas is likely to be bolstered by tighter emissions regulations taking full effect by then. German officials have assured the electric-car maker that its project will be fast-tracked through the country’s notorious bureaucracy.

Probably will give an update on the status of the plant when Tesla reports first-quarter results Wednesday after the close.

Tesla got a first taste of the risks when a court stopped work on clearing the site in February. The hiccup, though shortlived, sent shock waves through Berlin, where Tesla’s factory has boosted confidence in Germany’s ability to attract international investment. Last month, the coronavirus pandemic caused authorities to cancel a public hearing that’s key to the project’s approval.

Local officials on Wednesday said the hearing may be held virtually after Chancellor Angela Merkel’s cabinet of ministers backed a bill that would allow such forums to take place online.

When complete, the factory will employ up to 12,000 people and assemble as many as 500,000 vehicles annually. Tesla is moving into Germany’s heartland to vie with Volkswagen AG, BMW AG and Daimler AG’s Mercedes-Benz as the country targets a massive increase in electric-car sales.

Tesla, which earlier this month paid 43.4 million euros ($47.1 million) for the Gruenheide site, indicated it will send authorities revised planning documents shortly to account for planned changes in construction, according to Axel Steffen, a local official in the Brandenburg state environment ministry.

Those new plans are also expected to address concerns about the amount of fresh water needed, after local groups complained that the plant will consume too much in a region already drying up.

On Wednesday, the state’s environment minister, Axel Vogel, said there’s enough water available to supply the new plant, adding that Tesla is in close contact with local water authorities over any new infrastructure needed. “If a desert forms in Brandenburg, then surely it will not be because of Tesla,” Vogel told lawmakersduring a hearing in Potsdam.

1.Discuss any SIX (6) factors motivating Tesla Inc.’s internationalisation of its operations to Germany. Your discussion must include an appropriate introduction and conclusion. (8 Marks)

2.Use the SWOT framework to undertake a detailed 360-degree analysis of Tesla’s Berlin Gigafactory. Your discussion should include an appropriate introduction and conclusion. (12 Marks)

3.Before the final location decision in favour of Gruenheide which is near Berlin, Germany, more than ten European countries had campaigned to have the factory located within their jurisdictions (Galeon, 2016). The Netherlands, France, Finland, Poland, Hungary, the Czech Republic were at various points considered as potential sites of the plant.

Suppose that the final three locations considered by Tesla Inc. were Berlin (Germany), Prague (Czech Republic) and Vaasa (Finland).

Assume that Tesla Inc. used the following data associated with the production of Model Y for the final locational analysis regarding the three locations:

A target capacity of 10 000 Vehicles (Model Y) per week is projected for the Gigafactory. Assume that the expected average selling price for a unit of the Tesla Model Y is €47 000.

On the basis of the data provided above, use a locational cost-volume analysis to determine the most suitable location for the Tesla’s European Gigafactory. As part of the analysis, plot the cost curve for each of the threelocations on the same graph, determine the total cost for each location, and the expected profit for each location. For the plots, use units from 0 to 15 000 at intervals of 1 000.