Tesla announced last week that it would build a new Gigafactor – Tesla's mandate for a rather grandiose term for a car factory – near Berlin.
This will bring the Tesla Gigafactor count to four, with facilities in Nevada, New York State, China and now in Germany. Not all of these plants are explicit for assembly of vehicles, but they may be as needed. By calculation, this means that Tesla has pledged to build more factories than any other established car maker in the world.
Tesla could offer some industrial logic to a factory in Shanghai, given that China is likely to be the world's best growth market for all electric vehicles and that Western car companies prefer to build cars where they sell them.
But Europe is a far different story.
Capacity utilization in the automotive sector is at a low 80% range, an embedded structural problem that business leaders in the industry have been worried about for a decade (the late Fiat Chrysler Automotive CEO Sergio Martione did a great job of publishing widely presentation for 2015, undoubtedly titled "Confessions of a Garbage Capital").
Mature market with limited future growth and too many underutilized factories
The European car market is large and mature, and we probably don't expect much growth. The wild card is a switch to electricity, driven by rising government emissions and fuel economy standards and problems with diesel engines, as a result of the Volkswagen cheating scandal.
However, electric cars will not really solve the problem of overcapacity. Europe could completely abandon internal combustion and still have … 20% of its full-scale car factories.
Enter Tesla. Chief Executive Officer Elon Musk was in Germany last week to attend the annual Golden Steering Wheel Awards given by Business Insider publication Axel Springer's Auto Bild. One should never miss the opportunity to keep Tesla's enthusiasm high, Musk gave the German audience what he wanted and announced the Berlin gigafactor.
Automatic production is a bit of a change; there are operating factories in the world that exist around the beginning of the 20th century. Tesla's main congregation, in Northern California, opened in the 1960s (Tesla bought it after the financial crisis). But for the most part, 21st-century automation outside of the operations of expensive exotic car plants is a coded process.
Musk has repeatedly suggested reinvesting this into the creation of highly automated factories, but Tesla has done just the opposite: improvised exterior assembly lines in California and a higher number of enclosed voices than Fremont had when it was a General Motors general factory. Toyota in the eighties.
Maybe Giga Berlin can fix this, but that wouldn't really solve the problem of general power. The bottom line is that Europe does not need more cars.
What is Musk's motive? It's mysterious …
In this context, it is mysterious, if not mystifying, that Musk would like to build a new factory. There are many plants that European carmakers would be happy to sell, for a track, and there are contract manufacturers – such as the Austrian Magna – that could start assembling Tesla vehicles faster than they could build " Tesla ”and are a new facility.
It is worth noting that while Tesla's ambitions sound great, these new Gigafactories are all billion-dollar proposals – and Tesla is borrowing them for 2019. If they work for 30 years, inflation should take care of debt. But much of the competition has built its plants with money raised decades ago. And some of those factories are designed to close or operate far below full capacity. Ford reduces its European footprint to 18 out of 23 plants and reduces shifts.
This should be a happy hunt for Tesla, and Musk can buy more than build. But obviously, constructing something shiny and new sounds stronger.
Beyond the European question of overcapacity, any new Tesla plant is likely to depress Tesla's approach to wireless access to the automatic assembly. At a time when every other major carmaker adopted an industry-standard "lean" production model, pioneered and refined by Toyota in the 1970s and 1980s, Tesla continues to work more like a GM in the 50s of the last century. (or, with its makeshift assembly line, the 1910s Ford).
Musk's cult of "production of hell"
David McNew / AFP / Getty ImagesThe output is pretty appealing; Tesla makes a nice car. But Musk has also created a cult of "production hell," which is simply confusing to industry professionals who are accustomed to vehicles moving inadvertently from launch to production in a year or two. Germany, an industrial plant, is particularly good at this, so that Musk can tear his parachute with his ideas of eerie thinking.
But honestly, he doesn't have to bother. Or maybe he should, if his main goal is to keep the Tesla story fresh (that is). Tesla already has its own factory in Europe, located in the Netherlands, but it is the last assembly center, complete with US-supplied vehicles. A plant for the drying of nuts on industrial land in Europe is a much more attractive plot.
In many ways, Musk deserves his reputation as a genius. He's by far the biggest living car dealer, returning the greats of the business: Henry Ford, Enzo Ferrari, William Durant. But when it comes to blocking and resolving things, his genius is useless. He constantly overcomes and reliably chooses the hard way when the easy way stare at his face.
The result is a useful drama. But as Tesla grows larger, the routine gets older. And if he really wants to sell more cars in Europe, there are far easier ways to do that than build a continent factory.