Tesla’s German Super factory temporarily stranded: Shanghai model difficult to replicate

Tesla still has a lot of problems to solve if it is to establish itself in continental Europe, the home of traditional cars. Tesla’s fourth super factory in the world has been blocked in Berlin. On February 17th, Tesla’s first superfactory in Europe and the fourth in the world after Shanghai was called off by German authorities because of environmental concerns and forced by a large group of police. At this time, the construction officially began less than four days.

Tesla's German Super factory temporarily stranded: Shanghai model difficult to replicate

On November 12 last year, Musk made a surprise appearance at the not-so-known “Golden Steering Wheel” awards event hosted by the car edition of Bild newspaper in Germany, and “inadvertently” during the event Tesla’s fourth superfactory will be built in Glenhead, Brandenburg, just 20km from the German capital Berlin.

For a while, the town of less than 9,000 people was boiling.

With at least 12,000 jobs and up to 4 billion euros in investment, Tesla’s arrival is not only the state’s biggest investment since the reunification of the two countries, but also a timely rain to revive the region’s perennially sluggish economy.

But for now, Tesla must face the harsh reality that access to the European market will not be easy. It’s not just environmental lawsuits launched by local residents, but there are still many problems that Tesla needs to address if it is to gain a foothold in continental Europe, the home of traditional cars.

Why is it stranded?

“In addition to the bat’s ecological community, there are also lizards and pythons that have to be relocated. “What Musk, once seemingly omnipotent in Silicon Valley Steel, is facing in Germany right now, is the “no-nonsense” problem. The request from the German species protection association VLAB is also one of the main obstacles that is currently holding Tesla back on track.

“We’re going to do everything we can to make sure this investment succeeds,” said Dietmar Woidke, the state’s governor, even before Tesla contacted authorities about land acquisition.

But Mr Vodico seems to have forgotten the lessons of 19 years ago.

As early as 2001, BMW had planned to invest DM 1 billion in a new plant in Glenhead, but Glenhead screwed up. Because of the endless environmental activities and protests of the local residents, BMW eventually turned to another East German city of Leipzig.

As was the case, the good news about Tesla’s investment in the plant was quickly drowned out again by protests from local environmental groups and some residents. According to the plan, the Tesla plant will need to clean up 155 hectares of forest before construction, and more than 18 million cubic meters of water per year after full production capacity is fully opened, much of which will be guaranteed by the extraction of groundwater.

Will deforestation destroy local ecological communities? Will the huge amount of water used cause groundwater to dry up? These concerns have been the result of a series of demonstrations in the area since December. Although the ecological value of the single planted pine forest is not significant; in a species inventory conducted in January, only two bats were found in the entire forest area; and even Tesla has promised to reduce maximum water consumption per hour from 372 cubic metres to 243 cubic metres and compensate for three times the area of mixed forests in the area. But it still doesn’t help.

Just after Tesla began deforestation on February 13th, the Brandenburg Green Alliance, an environmental group protesting the invalidity, saw legal weapons being sacrificed. The next day, an emergency lawsuit was filed with a local lower court, which refused to accept it on the grounds that “the Environment Department had made a full assessment”. On February 15th the reluctant environmental groups decided to appeal to the High Administrative Court, and this time they succeeded.

The High Administrative Court held that “environmental groups’ claims should not be considered unpromising from the outset” and declared that Tesla’s deforestation must be suspended. The subtext behind it is that efficiency-conscious Tesla has cut half its forest area in less than four days, and if the court does not call a halt, it will take only three days to cut down all the 92 hectares of forest required for the first phase of the project. The lawsuit will then become meaningless.

As for the timing of the resumption of work, which is of the greatest concern to all parties, the court did not give an exact time node. By convention, the Court will still need one to two weeks to reach its verdict as soon as the two-day collection of materials is completed. Meanwhile, as of March 5, local residents could still file other lawsuits against Tesla in court. It also means that the chances of re-entry by the end of February are slim, and in the worst case, the legal process will be delayed until the end of March.

This is certainly hard for Tesla to accept.

Under German environmental regulations, the march of spring is a legal period for bird breeding and protection, and the next few months will not be able to carry out forest clearing. Cutting by mid-March is a central part of the progress of ensuring the construction of the Tesla plant.

The head of the Brandenburg state’s economic department, J?rg Steinbach, said on Monday that the worst-case scenario would be delayed by nine months. In a recent report to the SEC, Tesla also acknowledged that “we need to deal with complex local environmental, production, and safety regulations that may face delays in licensing and negatively impact performance.” “

Tesla's German Super factory temporarily stranded: Shanghai model difficult to replicate

“Shanghai model” that is difficult to replicate in Germany

“It’s ridiculous, it has nothing to do with environmental protection!” “Even the Greens, who play the main green card, are the first to accuse local environmental groups of making unreasonable noises.

But the root cause of Tesla’s Berlin super factory trouble is not just rogue environmentalists.

Tesla’s own pursuit of speed and reliance on local government skew policies are the trigger.

After a taste of the shanghai plant’s arrival and commissiontening ten months after it opened, Tesla has also “aggressively” set the pace of construction in Germany: the Berlin plant will be put into operation by July 2021, with an initial production capacity of 150,000 models, with Model 3 as the main model, and 500,000 long-term units.

But the Shanghai experience is not so easy to replicate.

Tesla’s Shanghai plant, as the largest foreign-owned manufacturing project since Shanghai’s reform and opening-up and the benchmark project in the new area of the FTZ, has been given priority by the Shanghai municipal government, parallel approval and special handling in the process of approval, including EIA, which obviously does not apply in Germany.

Like the “successful experience” of building on the edge of the port-side area, Tesla began deforestation without any environmental permits. Earlier, in an effort to speed up construction at the plant, the Brandenburg state government agreed with Tesla to issue a temporary environmental permit based on Section 8 of the Federal Emissions Protection Act that is “good for public welfare.”

Temporary permits give Tesla the privilege of pre-cutting forests, but if final environmental permit approval fails, Tesla must restore the forest to its original state.

Since the right to interpret “public well-being” is not monopolized by the government, and since the local government has previously used administrative power to beat the local head of the German environmental association Nabu, the special agent suddenly became the legal basis for the environmental protection group’s appeal. Even the German economics community, represented by Clemens Fuest, director of the Munich Institute for Economic Research, opposes the exception of Tesla, whose previous environmental banner, in addition to ensuring fairness, has now become a shackle not to relax its EIA review.

But even if Tesla is able to complete its Berlin plant on time next summer, it will have to face an important one-off if it is to replicate its business success story in Shanghai: subsidies.

The Tesla Model 3 enjoys a state subsidy for new energy vehicles and a reduction in vehicle purchase tax in China, according to public information released by the Ministry of Industry and Information Technology in August and December last year. Taking the domestic version of the Tesla Model 3, which started at 3238 million yuan after January 3, consumers will not only be able to enjoy a state subsidy of 24,750 yuan, but also waive the 28,650 yuan vehicle purchase tax. The final price of the Tesla Model 3 Base also dropped to $299,000.

In addition to the benefits on the consumer side, according to documents submitted to the Securities and Exchange Commission by Bloomberg and Tesla, the city also offered Tesla preferential terms at the production end. But it’s not easy for Tesla to get such a discount in Germany.

On the one hand, the Tesla Model 3 has been subsidized by new energy cars in Germany, whether imported or not, and model Y is not on the subsidy list;

The first subsidy Tesla has applied for comes from brandenburg, where the new plant is located. Although the exact amount of the subsidy is still difficult to estimate, according to Tillmann Stenger, chairman of the Brandenburg investment bank, the amount will be much higher than the 100m euros. Under EU rules, subsidies for similar large investments are capped at 6.7 per cent of the investment, or 270 million euros, subject to separate EU approval.

The second, more important government subsidy comes from the EU-led subsidy scheme IPCEI, which produces up to 3.2 billion euros for power battery research and development. Tesla does qualify for the subsidy, but it won’t be easy to get it, since the Company’s Berlin plant also plans power battery-related capacity.

“There will be no special treatment for Tesla, and there will be no discrimination,” German Economy Minister Altmaier told German newspaper Le Monde on February 9. While agreeing in principle to give Tesla the green light, Altmeier also offered: “Germany cannot be allowed to become a foundry base, in Germany must have a research and development design and high value-added industrial chain links, and all power-battery manufacturers that can meet sustainable production can receive subsidies.” Fifty-five companies from 14 European countries have now joined the alliance. “

Altmaier does not seem to be referring to the last sentence in the context above, the European Power Battery Alliance, formed by IPCEI.

The alliance was set up last year by Germany and France, and the first phase of the project attracted more than a dozen companies, including BMW, PSA and BASF. Following the approval of the European Commission in December, the first phase of the project will build two power-battery plants with an annual capacity of 32 GWh on the German-French border.

The alliance was set up to change Europe’s backward status in this area by encouraging the development and production of home-grown power batteries. The current European power battery market is dominated by Asian companies such as Ningde, Panasonic, Samsung SDI and LG Chemical, while local European manufacturers such as Varta, Saft and Northvolt are still unable to match them.

The prerequisite for Tesla’s subsidy is to be included in the second phase of the European Power Battery Alliance. Tesla will then be forced to share technical standards with other European companies on a process, in addition to being regulated by EU governments. It is also seen as a move by Europeans to promote local industries, and even the EU version of “market-for-technology”.

The battle between tradition and the upstart

Although it is still more than a year away from Tesla’s official arrival in Europe, Tesla’s arrival will also facilitate and accelerate the electric transformation of the European autoindustry industry. But for German and European automakers accustomed to the rise of the internal combustion engine era, Tesla’s break-in is a “deep-water bomb”.

“Cars are no longer just vehicles, they will be the most important mobile device, which means the era of traditional carmakers is over. The future of the Volkswagen Group lies in digital technology. The Volkswagen Group also wants to be like Tesla…” Vw Group CHIEF Executive Dees’s speech to the global board a month ago was an indication of how much power Tesla has.

In his speech, Mr. Dees fondly recalled Nokia’s past, as if VW was already the burning offshore platform, and that Apple, which could get rid of Nokia, had only one in the auto industry: Tesla.

In fact, on February 3rd, just two weeks after Deiss’ speech, Tesla’s market capitalisation surpassed that of the German giant, which has dominated global car sales for years. Soon after, Tesla’s market capitalisation exceeded the combined market capitalisation of Volkswagen and BMW.

Aside from the perfect performance in the capital markets, what really worries the public is Tesla’s strength in Europe,” the traditional car base in Europe.

According to the German statistics agency Statista, the 2019 European-wide Tesla Model 3 leads the second tier with 65,682 new registrations, with Renault Zoe and BMW i3. As for vw’s only-get-got e-Golf and Audi’s e-tron, they failed to make the top five.

It’s worth noting that unlike the Model 3, which has dropped below 300,000 euros in China, the Model 3 base of 46,000 euros is still more expensive than the 39,000-euro base version of the biggest rival BMW i3 and the Renault Zoe’s less than 20,000 euros.

Tesla's German Super factory temporarily stranded: Shanghai model difficult to replicate

Tesla’s big shock isn’t just about sales figures.

Since Musk announced that it would build a plant in Berlin, Tesla has been the best reference for Criticism from The German economy and academia for the country’s poor transformation. The loudest response came from an op-ed published in the Business Journal by Frank Thelen, a prominent German investor. In the article, Taylor points out that German carmakers have missed out on an electric iPhone moment, and that bmw and Volkswagen will be on the road to the U.S. automaker’s decline in the future.

Tesla, however, is by no means a peace of mind. While Tesla already has a head start in the European electric car market, it is also on the verge of facing increasing competition and challenges from traditional forces.

Before and after last year’s Frankfurt Motor Show, slow-moving German car makers finally decided to declare war on Tesla, launching a series of all-electric new models, including the Volkswagen ID3, Porsche Taycan, BMW iX3 and logo e-208. The models will go on sale this year in a bid to grab the market before Tesla’s Berlin plant is completed.

One of the biggest rivals is Porsche’s Taycan. In the face of Porsche’s “fastest electric car is Taycan”, Musk even sent the Model S, with Porsche agreed to be at the Nurburgring circuit who is the king of electric cars.

In addition to the pressure from other automakers, Tesla’s ongoing quality problems are also a major factor in keeping Tesla moving further.

According to the author’s visit to Audi’s headquarters in Germany, the “nitpicking” of German engineers generally rated Tesla in general. Rough workmanship, cheap interior, quality control of sheet metal parts, and unsatisfactory NVH control are all fatal disadvantages of Model 3.

“Even Tesla’s proudest Autopilot is actually more of a gimmick, and Tesla’s performance in areas such as strong backlight and construction is not ideal. “Dr. Rohretzer, who is responsible for the validation of Audi’s self-driving algorithm, said.

Currently, the German government has led a validation project called PEGASUS, which aims to test algorithm feedback in various virtual extreme scenarios. Dr. Rohritzer believes that the road-tested Tesla isn’t perfect in the field, and says he’s interested in showing his collection of videos of Tesla’s self-driving accidents: “It’s also one of our entertainment slots.” “