German automation talent strengthens Musk's battery for Europe

FRANKFURT (Reuters) – To remove bottlenecks last year at his Tesla Inc ( TSLA.O ) in California, Elon Musk flew in six plans with new robots and equipment from Germany to speed up battery production for its model 3.

FILE PHOTO: A Volkswagen vintage car drives a Tesla Model X electric car that charges batteries in Berlin, Germany, November 13, 2019. REUTERS / Fabrizio Bensch / File Photo

Now CEO in Tesla is trying to tap the German automation ecosystem directly with Tuesday's announcement that the electric car manufacturer will build a European car and battery plant near Berlin.

So far, Musk has failed in its plans to make a factory so highly automated that it allows Tesla to make cars more efficient than much larger competitors. As a result, the automaker has struggled to meet production targets and has been hit with key company defections by competing firms.

The new German factory is designed to help change all this.

“Everyone knows that German engineering is outstanding for sure. You know that is part of the reason why we are locating Gigafactory Europe in Germany, ”Musk said at a prestigious German car awards ceremony in Berlin late Tuesday.

BMW ( BMWG.DE ) has a factory in Leipzig, where it builds its i3 electric vehicle, and it will source battery cells from a factory in Erfurt powered by China's Contemporary Amperex Technology Ltd (CATL) ( 300750.SZ ) ..

VW cools a plant in Zwickau to build 330,000 electric cars and the German engineering giant Siemens AG ( SIEGn.DE ), which has an industrial and technology hub in Berlin, said last week that it met with Musk to discuss advanced production and car charging projects.

German automakers and suppliers utilize a € 1 billion ($ 1.10 billion) fund created by Germany to increase battery cell production and is further supported by a government-funded research facility to increase knowledge of battery cell development.


Tesla has not yet met the goal of building more than 500,000 Model 3 cars by 2018. This goal was set back in 2016, and since then Tesla's production guru, Peter Hochholdinger, former Audi production expert, stopped joining rival Lucid.

This year, Tesla expects to deliver 360,000 to 400,000 cars, a target that includes sales of all models.

By contrast, the Volkswagen brand delivered 6.24 million cars last year and is preparing its global production network to build 22 million electric cars by 2028.

To increase production, Tesla began making its Model 3 in a tent, but the California -built cars often failed to meet German quality standards.

In August, German car rental company Nextmove dropped an order of 5 million euros ($ 5.55 million) on 85 Tesla Model 3 electric cars, following a dispute over how to solve quality problems.


Although Tesla has chosen a high cost center, there is greater potential for automation with electric cars since they are less complicated to build than internal combustion engines.

An internal combustion engine has 1400 components in the engine, exhaust system and gearbox. By contrast, an electric car's battery and engine have just 200 components, according to analysts at ING.

While it takes 3.5 hours to produce the average internal combustion engine, and the average gearbox requires 2.7 hours of assembly, an electric motor only takes an hour to assemble, consultants at Alix Partners said in their Global Automotive Outlook study.

"Personnel is not a high cost factor in electric vehicle production," said Evercore ISI analyst Arndt Ellinghorst.

Today, the biggest cost factor is still battery packs, which make up between 30% and 50% of the cost of an electric vehicle.


By adding the "Made in Germany" quality, Tesla was able to increase sales of its already class-leading electric cars.

FILE PHOTO: SpaceX owner and Tesla CEO Elon Musk arrives at the red carpet for the "Das Goldene Lenkrad" car awards given by a German newspaper in Berlin, Germany, November 12, 2019. REUTERS / Hannibal Hanschke / File Photo

Tirsla Tirsla Model 3 was awarded the "Golden Steering Wheel" by Germany's Auto Bild magazine, with juror Robin Horning saying that Model 3 had beaten the new BMW 3 Series and Audi A4 in the middle. and premium class ”category.

Volkswagen boss Herbert Diess congratulated Musk for winning the award.

“I want to congratulate you. With all this competition in Germany, it is a great achievement, ”he said at the awards ceremony. “I thank you for pioneering, for pulling us and pushing us. Elon is the innovator. ”

Reporting by Edward Taylor in Frankfurt, Joern Poltz in Munich, Jan Schwartz in Hamburg and Ilona Wissenbach in Stuttgart; Edited by Ed Tobin and Matthew Lewis

Our Standards: The Thomson Reuters Trust Principles.

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