Inside the deal to build Gigafactory Berlin

Bloomberg has a very interesting story about the negotiations between Tesla and local governments over the location of the European Gigafactory:

Fresh from his experience building a factory in China, Musk had a demand that was as clear as it was hard to execute for notoriously bureaucratic Germans: to build the site as swiftly as the one in Shanghai, according to Brandenburg’s economy minister, Joerg Steinbach.


Now that’s what I call a challenge. This is a genius way to slice through bureaucracy: make it a point of national pride. Who can get it done faster, Germany or China?

“There was very intense competition in recent months among different European nations,” Economy Minister Peter Altmaier told reporters on Wednesday in Berlin. “It’s an important and positive development that Germany was chosen.”


They really wanted to win Tesla over. And they were willing to provide incentives to help make that happen:

The choice of Berlin and its surrounding area hands Musk several advantages, not least free money in form of subsidies. There’s the proximity to a government keen to sponsor the industry’s transformation. Labor costs in eastern Germany are generally lower than in the traditional engineering hubs in the southern part of the country. And Berlin, where new startups are founded each day, is an attractive place to live for the tech workers Tesla would seek to attract for its design center.


For those who don’t know much about Germany geography, Berlin is not typically where you find car factories. There are very few factories of any kind in the area. The German auto giants have their headquarters and factories further south, in their own little company towns.

Famously labeled “poor but sexy” by a former Berlin mayor, the city has thrived in recent years thanks to a steady influx of young entrepreneurs and IT professionals


This is a much better location in Germany to recruit the kind of top talent Tesla wants. The city is quickly becoming a tech and software hub, and is the perfect location to make people want to move to Tesla.

The area where Tesla plans to put the factory, called Gruenheide just east of Berlin in the state of Brandenburg, provides quick access via the Autobahn and a link to public transport. It’s a site that BMW had considered before choosing the city of Leipzig a few hours south for a new factory in 2001, the last time a car company built a major new facility in Germany.


A new car factory doesn’t get built every day –– this is the first new one in nearly 20 years in Germany.

The government in Brandenburg, one of five federal states in the former communist east, also lobbied hard to win over Musk, offering at least 100 million euros in aid.


That’s $110 million USD.


Officials in Brandenburg described the negotiations with Musk as an emotional roller-coaster ride, with the politicians struggling to read the billionaire’s intentions. But by last week, things were looking up. After Musk arrived in Berlin, he toured the location where the factory would sit, and he took a local train back to central Berlin to try for himself how long the commute might take.


Brandenburg officials to train conductor: “You bring that fucking train in on time, ok? I want to see how fast this baby can really go”

With Tesla adding as many as 10,000 jobs to Berlin and the region, according to Bild, it’s also a boon for the German capital and its burgeoning tech scene. Famously labeled “poor but sexy” by a former Berlin mayor, the city has thrived in recent years thanks to a steady influx of young entrepreneurs and IT professionals attracted by the capital’s mix of affordable housing (the city just announced a rent freeze), top-notch universities, and homegrown tech successes including fashion retailer Zalando SE and food delivery startup Delivery Hero SE.


10,000 jobs is the same number of people who are employed at the company’s factory in Fremont. Tesla has around 40,000 employees total, so this is quite significant. Maybe they mean employees and contractors? But could be conceivable as a number of direct employees given employment at Fremont.

And the sprawling new airport, still under construction, is a massive blemish on the region’s record of getting big projects off the ground. It’s an ignominy that was on the U.S. billionaire’s mind when he followed his announcement with an appeal to get the job done.


For more on the airport disaster, check this LA Times piece out. This will be Berlin’s chance to redeem themselves.

Watch the announcement of Gigafactory Berlin

Read the full story at Bloomberg

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