June 20, 2018 / 11:18 AM / 5 months ago

Tesla's Musk says Germany a front runner for Europe Gigafactory

STOCKHOLM (Reuters) - U.S. electric carmaker Tesla (TSLA.O) favors Germany as the location for its first European Gigafactory, its chief executive said, in what would be the latest move by an outside firm into the European battery market.

FILE PHOTO: The Tesla Gigafactory is shown under construction outside Reno, Nevada May 9, 2015. Picture taken May 9, 2015. REUTERS/James Glover II/File Photo

Industry experts expect a green car revolution to boost Europe’s battery market to around 250 billion euros ($290 billion) by 2025. Asian companies including CATL (300750.SZ) and Samsung (006400.KS) have already signed up companies or set up their own European operations, prompting European politicians and business leaders to call for more home-grown investment.

"Germany is a leading choice for Europe. Perhaps on the German-French border makes sense, near the Benelux countries," Tesla's billionaire boss Elon Musk said on Twitter here Tuesday, responding to a public tweet.

Tesla already has operations in Pruem, Germany, which is only 30 kilometers from Belgium, and about 100 kilometers from the French border.

Pruem is the headquarters for Tesla’s Grohmann Engineering division, which specialises in automated manufacturing systems for battery making plants. Grohmann recently built a production line for Tesla’s U.S. battery factory in Reno, Nevada, to speed up production for its Model 3 electric sedan.

In a sign of the strength of Asia’s position in the market, Volkswagen - Europe’s biggest carmaker - recently picked LG Chem (051910.KS), Samsung and China’s Contemporary Amperex Technology Co Ltd (CATL) to deliver $25 billion of batteries.

CATL is also considering an investment in Germany, the economics ministry of the local state of Thuringia told Reuters. “We are negotiating with Chinese battery manufacturer CATL about localizing production in Thuringia. As far as we know several locations across Europe are being considered for such an investment,” a spokesman for Thuringia said.

Germany’s TerraE and Sweden’s Northvolt have plans for large lithium-ion battery factories in Europe, but face a battle against companies like Tesla and CATL that have established technical expertise and supply chains.

Northvolt, founded by a former Tesla executive, recently said it would tap the European Investment Bank for a loan to fund the first leg of construction and also cut the estimated cost of building its Tesla-style factory.

Tesla has previously said it plans to build three more Gigafactories to accompany its first in Nevada, United States. That plant is jointly owned by Panasonic, which is exclusive battery cell supplier for Tesla’s mass-market Model 3 sedan.

It was not immediately clear if Tesla would build the European plant with Panasonic.

Reuters did not immediately get a response from Tesla’s German media team seeking further comment on Musk’s tweet.

Tesla has faced challenges ramping up Model 3 production, forcing it in recent days to announce plans to cut several thousand jobs to help reduce costs.

Reporting by Esha Vaish in Stockholm and Edward Taylor in Frankfurt; Editing by Mark Potter

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