Long-awaited German giant Tesla factory gets conditional green light

Potsdam, Germany, March 4 (Reuters) – Tesla Corporation (TSLA.O) The state of Brandenburg received conditional approval for its giant German factory near Berlin on Friday, ending months of delays in building the landmark 5 billion euro ($5.5 billion) plant.

The massive plant, which is crucial to Tesla CEO Elon Musk’s ambitions to conquer European market leader Volkswagen (VOWG_p.DE)It was supposed to open last summer.

Germany’s largest automaker has the upper hand in Europe, with 25% of electric vehicle (EV) sales versus Tesla’s 13%.

Brandenburg state premier Dietmar Wiedek told a news briefing that the development represented a “big step into the future,” adding that the Tesla plant would be a major industrial and technological engine for Germany and the region.

Unions said last month that about 2,600 of the plant’s expected 12,000 workers have been hired so far, and Tesla is in talks with several parts suppliers in the region to get as much locally as possible, reducing wait times and costs.

In a sign of the fierce competition Tesla faces, Volkswagen said on Friday it would spend about 2 billion euros on a new plant near its Wolfsburg headquarters to make the Trinity, the first of a new generation of electric cars for the German carmaker, set to begin construction. Next year.

Friday’s 536-page conditional building permit for Tesla doesn’t mean the US electric car pioneer can start production immediately. It must first demonstrate that it meets several conditions, including water use and air pollution control.

Only then will Tesla obtain its long-awaited operating permit and will already begin rolling out the 500,000 battery-powered vehicles it wants to produce each year at the new plant, located in the small community of Gruenheide.

Another obstacle to securing the site’s water supply emerged late Friday, when an administrative court in Frankfurt Oder sided with environmental groups that challenged the license granted to a local water utility to supply the Tesla site. Read more

But the court said that procedural errors made in the licensing decision could be remedied by the water utility, leaving the door open to salvage the water supply arrangement.

The start of production in Germany means Tesla can deliver its Model Y cars to European customers faster and at lower cost, after fulfilling orders in Europe from its Shanghai plant in recent months as it awaits site approval.

Brandenburg Environment Minister Axel Vogel said Tesla plans to show it meets the conditions imposed within the next two weeks, while objections could be submitted within the next month.

Tesla’s next challenge will be to ramp up production as quickly as possible, which Musk said at an on-site exhibition in October would take longer than building the plant.

Local environmental groups have long feared that the plant could negatively affect local habitats. Several public consultations, focused primarily on this aspect, delayed the process, with Musk expressing his disquiet on multiple occasions about the German bureaucracy.

The plant, which Tesla has begun building under pre-approval permits, will also include a battery plant capable of generating more than 50 gigawatt-hours (GWh) per year – outperforming European competitors.

Musk said car batteries produced at the site will initially come from China, but he plans to reach production volume at the German battery plant by the end of next year.

(1 dollar = 0.9163 euros)

Additional reporting by Nadine Chemrosek, Christoph Stitz, Jan Schwartz, Victoria Waldry and Ludwig Burger; Editing: Kirsti Knolle, Miranda Murray, Louise Heavens and Alexander Smith

Our criteria: Thomson Reuters Trust Principles.