Tesla Receives a Permit That Will Scare Its Rivals

Tesla  (TSLA) – Get Tesla Inc Report and Chief Executive Elon Musk are officially very close to starting production of cars at their Berlin-based European factory.

After several months of uncertainty, a key German regulator has approved the Austin EV manufacturer’s request, according to the German business newspaper Handelsblatt.

Tesla has been waiting for several months for a permit from the German authorities to start manufacturing vehicles in this gigafactory, which will primarily serve the European market.

The company won final approval from the Brandenburg state environment office. Brandenburg State Premier Dietmar Woidke would comment on details of the approval decision at a news conference in Potsdam on Friday, Handelsblatt reported.

Tesla Isn’t Alone in Expanding Overseas

This news comes as Lucid Group  (LCID) – Get Lucid Group, Inc. Report, one of Tesla’s main competitors, has just announced an agreement with Saudi Arabia to start construction of its first international factory in the Kingdom during the current first half. The company expects to manufacture as many as 150,000 vehicles a year at the facility.

Lucid and its luxury electric sedans are considered one of Tesla’s most serious rivals. There is no doubt that with the support of Saudi Arabia, which is also a shareholder, the Newark, Calif., manufacturer has the financial means for its ambitions.

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Tesla, which disbanded its communications department last year, did not immediately respond to a request for comment from TheStreet.

The state environment ministry recently said that Tesla would have to meet further requirements and provide evidence before the plan could go into operation, according to the newspaper, which doesn’t provide more details.

Early action is possible if nothing fundamentally speaks against the project and the investor implements it at its own risk.

Environmental Objections and Drought

Construction on the gigafactory started two years ago in Grunheide, about an hour southeast of Berlin. Musk had hoped to start production on July 1 last year, but the approval process dragged on, in part because Tesla expanded initial plans to include a battery factory. That led to further hearings.

Until the beginning of February, the timing of the final approval by the state of Brandenburg was still unclear because environmentalists still objected, as TheStreet’s Tony Owusu wrote.

Due to prolonged droughts in eastern Germany — even while the west of the country has seen floods — Berlin may be missing the good old days of excess groundwater, environmentalists argued.

Tesla was warned of this dynamic, but when Musk was asked last year whether constructing his factory in Brandenburg would deplete the area’s water supply, he broke out into laughter, calling the notion completely wrong.

But with this approval, the final hurdle has now been lifted.

Tesla plans to build the Model Y SUV at the plan. It is aiming to build up to 10,000 vehicles a week.

The company’s plan to take a chunk of the European electric vehicle market rests on the shoulders of its Brandenburg plant and the $5.7 billion Tesla is spending to ramp production. 

If the plant gets to full capacity, the 500,000 vehicles a year it will produce would more than double Germany’s 2020 production of EVs. 

Wall Street analysts have pinned their lofty stock-price targets partly on the success of Tesla’s expansion in Germany.

Credit Suisse last month raised its share-price target to $1,025 from $830 based on optimism about Brandenburg, with analyst Dan Levy writing that the plant “arguably serves as Tesla’s most critical incremental source of capacity.”

Levy called the German market “ground zero for the global EV inflection.”

Tesla produced 930,422 vehicles in 2021.