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Tesla (TSLA) to Build 300-Hectare European Factory in Berlin

Zacks Equity Research

Tesla, Inc. TSLA recently announced plans to buy a 300-hectare property with a view of establishing its first Europe-based factory on the outskirts of Berlin. The agreement stipulates a tentative property price of 40.91 million euros (45.36 million dollars) which can be adjusted if a different value is offered by an external evaluation.

The facility will include a design and engineering center, which will be used to produce cars, batteries and powertrains. Tesla is reportedly building its Model 3 and Model Y vehicles on site and aims to begin production in 2021.

Tesla's move, expected to create up to 7,000 jobs in Brandenburg, has been welcomed by politicians, unions and industry groups. However, around 250 locals took to the streets to protest, fearing the factory might endanger the surrounding forest's water supply and wildlife.

In November 2019, the U.S. carmaker announced plans to build a giant factory in Gruenheide, BB giving it the coveted “Made in Germany” label. Germany seems to be a logical choice for Tesla’s European Gigafactory as the country is the biggest market for Electric Vehicles (EV) with huge potential. As we know, Germany is the automotive hub with engineering prowess, and is home to various auto biggies like Volkswagen VWAGY, Daimler AG DDAIF and BMW BAMXF. Reportedly, German carmakers and suppliers are likely to build around 150 EVs by 2023.

Shares of Tesla have outperformed the industry it belongs to over the past year. During this time frame, it has surged 70.8% compared with the industry’s rise of 31.8%.

Meanwhile, the company has already begun deliveries from the Gigafactory 3 plants in Shanghai. With China being the biggest EV market, Tesla’s plans to start production in the country bode well. The company has already managed to manufacture 1,000 saleable cars at its Shanghai factory, despite breaking ground less than 12 months ago. With more battery production, it will be capable of producing more than 3,000 units a week in the upcoming period.

Moreover, the company’s focus on expansion of its product portfolio, the introduction of car-sharing services and development of self-driving capability is commendable. With the Model 3 sedan being its flagship vehicle, Tesla has established itself as a leader in the EV segment. Rising Model 3 delivery, which forms a major chunk of the automaker’s overall deliveries, is aiding the company’s top-line growth. Revenues are likely to rise further as the Zacks Rank #2 (Buy) firm expects to make solid progress on Model 3 in the days to come. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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