Tesla stays ahead of the pack with new European plant

The Tesla CEO, who busted some awkward moves at a Shanghai plant opening two years ago, reprised his signature celebration Tuesday as the electric automaker ceremoniously opened Europe’s largest electric vehicle plant. Once fully operational, the German manufacturing site will be capable of assembling a half-million cars per year.

The event marked the culmination of two years of fighting with angry environmentalists, complying with mounds of paperwork, and constructing an intricate, 4.8-million square foot factory amid a global pandemic and supply chain crunch.

Only now comes the hard part: staving off hard-charging Volkswagen.

While Tesla is several steps ahead of its electric vehicle competition, evidenced partly by the sprawling new plant outside of Berlin, the California-based company’s ambitions for more European market share will depend on whether Volkswagen, the continent’s top automaker by volume, can make up ground on its home turf.

For now, Tesla has a head start of its European rival. 

Tesla edged out Volkswagen as Europe’s top-selling battery-powered electric vehicle in 2021. Car buyers there registered 167,500 Teslas last year, Automotive News Europe reported in January. Meanwhile, Volkswagen had 166,350 registered EVs in Europe, and Renault trailed in third with roughly 97,000.

That gap could grow in the coming years as Tesla’s German plant comes online. Reuters reported Tuesday that JP Morgan estimates the Berlin-area site will produce 54,000 vehicles in 2022 and 280,000 cars in 2023, eventually reaching full capacity of 500,000 by 2025. Volkswagen, meanwhile, isn’t scheduled to complete its signature all-EV plant in Germany until 2026.

“With the race for electrification in Europe hitting another gear and competition for EVs increasing from every angle, with VW, among others doubling down on its EV ambitions, we view Giga Berlin as a major competitive advantage for Tesla to further build out its supply footprint in this key region,” Wedbush Securities analysts Dan Ives and John Katsingris wrote in an investor note Monday. (The investment firm is a well-known Tesla bull, with a current stock rating of “outperform.”)

Volkswagen, however, has promised to rapidly expand its EV footprint in Europe, with some built-in advantages.

Unlike Tesla, which constructs its plants from scratch, Volkswagen can more-cheaply retrofit some of its 120 combustion vehicle factories to produce EVs. VW already converted one German plant and is in the middle of a similar switch at its Chattanooga, Tenn., facility.

Volkswagen also boasts huge name recognition and numerous brands with strong customer loyalty in Europe, allowing it to transition more models to electric vehicles down the line.

Perhaps most importantly, Volkswagen has money on its side. The company announced plans last December to spend about $180 billion over the next four years on its EV shift. By comparison, Tesla’s total gross profit reached $14 billion in 2021.

Still, Tesla’s management know-how and technological advantages give it more than a fighting chance across the pond. 

While Volkswagen is making huge investments in battery development and automated driving software, Tesla already stands at the forefront of both fields. Patrick Hummel, UBS’s global auto analyst, told Fortune’s Vivienne Walt earlier this year that Volkswagen “seems to have difficulties getting things done quickly,” describing the company as a “supertanker.”

“Closing the gap versus Tesla anytime soon is wishful thinking,” Hummel said.

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Jacob Carpenter

NEWSWORTHY

You’ve been warned. President Joe Biden once again urged U.S. companies Monday to tighten their cybersecurity protocols amid “evolving intelligence” suggesting Russia could launch online attacks against American targets, The Washington Post reported. Biden, who delivered the warning during a quarterly meeting with corporate executives, said the federal government would help companies that requested support in beefing up cyber defenses ahead of expected Russian hacks. His comments came after a top White House cybersecurity aide bemoaned a lack of cybersecurity urgency in the private sector.

Behind the times. A leading anti-misinformation group claimed Monday that ByteDance’s TikTok app continues to promote false information about Russia’s invasion of Ukraine. Analysts at NewsGuard, a New York-based organization led by journalists, reported that they found inaccurate information and pro-Russian propaganda on TikTok within an hour of creating new accounts, often through a main feed with content recommended via the app’s algorithm. ByteDance, a Chinese company, has faced criticism for failing to aggressively police Russian propaganda on its platform amid the war in Ukraine.

Too many lawyers. Federal prosecutors alleged Monday that Google employees regularly try to shield internal records from litigation by improperly invoking attorney-client privilege on routine communications, The Wall Street Journal reported. In a court filing related to an antitrust lawsuit, the Justice Department said Google executives trained employees to bring lawyers into conversations and label documents as privileged when discussing sensitive topics, even if the conversations did not involve legal matters. Google officials refuted the claims of attorney-client privilege abuse, arguing that employees of large corporations often need to seek legal advice.

Sending a message. Alibaba now plans to buy back up to $25 billion in shares, up from an earlier ceiling of $15 billion, as the e-commerce giant aims to reassure investors rattled by the company’s 50% decline in its U.S.-listed shares price over the past year, The Financial Times reported Monday. The announcement follows reports in recent weeks that the Chinese government’s crackdown on tech companies, which caused huge drops in their stock price, is waning. Alibaba already has bought back about $9.2 billion worth of company stock since initially announcing a repurchasing plan in 2017.

FOOD FOR THOUGHT

Lightning rods. Silicon Valley’s biggest names keep going nuclear. Bloomberg reported Tuesday that several tech industry icons are independently pushing nuclear power as a viable solution for curbing carbon emissions and reducing reliance on oil-producing nations, including Russia. They’re joining a growing band of venture capitalists showering nuclear energy start-ups with billions of dollars—though skeptical investors and environmentalists question the viability and safety, respectively, of such efforts.

From the article: 

The war [in Ukraine] galvanized a sentiment which has been building in recent years in the startup world, where billionaires including Bill Gates, Jeff Bezos and Peter Thiel have opened their wallets to back next-generation nuclear companies. 

None of the advanced reactor startups has yet produced an operating commercial product, but some believe that the combination of tech advances and a new urgency around ditching fossil fuels could be a catalyst for the sector — which has mostly languished in regulatory purgatory since the 1970s.

IN CASE YOU MISSED IT

Ray Dalio’s Bridgewater reportedly backing a crypto fund means the world’s largest hedge fund and one of Bitcoin’s former skeptics is taking it seriously, by Taylor Locke

How Elon Musk and other billionaires can get a huge tax break for giving ‘to charity’—without helping any charities, by Maria Aspan

Russia banned Facebook and Instagram as ‘extremist’ organizations. YouTube may be next, by Nico Grant, Mark Bergen, and Bloomberg

GM shuts the door on a Cruise IPO by sealing a $3.45 billion deal for control of the robotaxi firm, by Christiaan Hetzner

How Samsung’s new line of mobile phones aims to stop the world from ‘choking on plastic’, by Bernhard Warner

Experts say Russia’s war on Ukraine is accelerating the ‘splinternet.’ But what is the splinternet?, by Sophie Mellor

Russia’s largest bank tells its clients to delay downloading software updates after ‘protestware’ attacks target Russian users, by Nicholas Gordon

BEFORE YOU GO

The forgotten city. A little trivia question: Outside of Silicon Valley and New York, which North American metro area employs the most tech workers? (Hint: it’s not Seattle, Austin, or Miami.) For the answer, you’ll have to go north of the border. As The New York Times reported Monday, Toronto has quietly flown under the media radar as a fast-growing hub for tech companies and jobs. For that, analysts cite Toronto’s highly educated workforce, a strong base of established tech companies, and liberal immigration policies, among other factors. The poutine probably doesn’t hurt either, eh?