Tesla takes on BMW, Mercedes, VW
Musk is taking his fight for the future of transport into the heartland of the combustion engine, where the established players once laughed off Tesla as an upstart on a feeble financial footing that could not compete with their rich engineering heritage.
Musk casually dropped the news of the plant at an awards ceremony in Berlin in November, taking the top executives of Germany's automakers by surprise.
"Elon Musk is going where his strongest competitors are, right into the heart of the global auto industry," said Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler. "No other foreign automaker has done that in decades given Germany's high wages, powerful unions and high taxes."
Building a factory in Europe's largest car market is a major test of Musk's global ambitions. Demand in the region is flat, and buyers are more loyal to local brands.
Meanwhile, labor costs in Germany's auto sector are 50 percent higher than in the U.S. and five times what they are in Poland, just an hour's drive away from Gruenheide.
On the positive side, electric cars require less labor to build, and Germany has a deep reserve of auto experts. The location also offers the advantage of being in close proximity to the country's leaders in Berlin.
Under pressure for being slow to pick up on the electric-car shift, Chancellor Angela Merkel's government extended a welcoming hand to Musk. Economy Minister Peter Altmaier offered to try to ease regulatory hurdles that may snag construction. "There's a lot at stake" in Tesla's plan, he said soon after the project was announced.
Musk's incursion comes at a strategically opportune time. Riding a wave of optimism after successfully starting deliveries of its China-built Model 3 sedans a year after breaking ground on a factory there, Tesla's stock has doubled in the past three months.
Meanwhile, German peers are struggling with the costly shift away from combustion engines. VW and Daimler announced thousands of job cuts last year, when German car production fell to its lowest level in almost a quarter of a century.