Tesla’s production problems extend beyond China. Its German plant isn’t firing on all cylinders

July 5, 2022, 6:21 PM UTC
Tesla CEO Elon Musk at the opening of the company's new electric car factory in Germany
Tesla CEO Elon Musk at his new German factory.
Christian Marquardt—Pool/Getty Images

The biggest threat to Tesla remains its operations in China—but don’t sleep on its angsty arrival in Germany.

As Tesla’s Shanghai operation roars back into action after painful COVID-related shutdowns, the electric-auto maker’s “gigantic money furnace” in Berlin, to use chief executive Elon Musk’s phrase, keeps flaring up.

Multiple media outlets have reported in recent weeks that the EV company faces hiring and supply-chain challenges at its new Berlin-area factory, where output is well behind the early days of its Shanghai counterpart. The challenges come as Tesla prepares for a preplanned, two-week shutdown of the plant for facility upgrades, which are designed to speed up productivity at the four-month-old factory, per the German publication TeslaMag. 

While Tesla officials expected a slow ramp-up at the Berlin factory, available evidence suggests it’s been a bigger slog than initially imagined. 

After several delays in opening the factory, in part resulting from environmental and regulatory concerns, workers in Berlin managed to produce just under 9,000 vehicles combined in April, May, and June, per figures compiled by Tesla production guru @TroyTeslike on Twitter. By comparison, the Shanghai facility pumped out nearly double that number in its first three months of operation. (Tesla expects to push about 500,000 vehicles out of the Berlin plant by the time it’s fully operational.)

In part, the lower Berlin total reflects Tesla’s global supply-chain issues, which forced German workers to pivot to lower-quality batteries for installation. 

But a Reuters report last month suggested Tesla remains off-track on its initial goal of hiring 12,000 employees for the plant by the end of the year. A local economy minister said in June that the company had about 4,500 staffers in Germany and planned to hire another 500 to 600 employees per month—a rate that must dramatically increase to approach the year-end target.

IG Metall, Germany’s largest automotive worker union, argued in late June that the hiring shortfall reflects Tesla’s low pay compared with that of its regional peers. 

“Many people would be interested in switching to Tesla, but ultimately decide against it, also because they sometimes earn considerably more in their current positions at other automotive companies,” regional IG Metall chief Birgit Dietze said at the time, according to Bloomberg.

While IG Metall has a clear incentive for making such a claim against notoriously union-unfriendly Tesla, the argument appears to carry some weight. TeslaMag, citing unnamed sources, reported Monday that nearly all employees would get raises totaling 6% in August. Tesla hasn’t commented on whether the pay increases are aimed at ramping up hiring.

Tesla’s most serious long-term business risk still rests in China, where a heavy-handed government wields enormous power over the company. 

The automaker reported Saturday that it had assembled about 254,700 vehicles globally in the second quarter of 2022, down from about 310,000 vehicles in the previous quarter, largely owing to government-mandated lockdowns in Shanghai. (Tesla shares, which are down 43% year to date, ticked up 1% in midday trading Tuesday.) At the same time, the Chinese government continues to heavily subsidize the nation’s EV sector, which could propel domestic rivals past Tesla.

Over the next several months, though, Tesla’s German operation will induce its fair share of medium-term headaches. 

Musk & Co. should eventually get that place humming, just as they did in China and at their California plant. As Fortune’s Christiaan Hetzner wrote in late June: “It’s only if these teething problems at Berlin and Austin continue deep into the fourth quarter that investors will probably need to be concerned.”

Getting to that point won’t be a smooth ride.

Want to send thoughts or suggestions for Data Sheet? Drop me a line here.

Jacob Carpenter


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From the article:

Some investors who are backing Chinese VC funds say China has promising startups in areas such as industrial robotics, enterprise software, healthcare and hardware development. 

The Chinese government’s policy priorities around promoting the development of advanced technology, including in semiconductors and artificial intelligence, has also given investors more confidence their newer bets could avoid Chinese regulatory challenges that have plagued consumer-facing companies such as China’s ride hailing leader Didi Global, whose VC backers included Sequoia China.


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