In Berlin, admire Tesla’s new plant. How will Israel be affected?

The opening of Tesla’s new plant in Berlin is taking place at the best and worst time at the same time. On the one hand, the demand for electric vehicles in the world and in Europe in particular has never been greater. In Germany, for example, the price of a liter of fuel at stations is currently around 2.2 euros per liter. This is an all-time high, which puts the entire German economy and all land transport in the country and Europe in a “price shock”, and sends all customers looking for electric alternatives.

In Europe, it is estimated that there are currently two or three customers for every new electric vehicle that manufacturers are able to produce, even if they are premium electric vehicles such as the Tesla. In other words, it is likely that every vehicle produced by Tesla’s new plant in the coming year already has a customer.

On the other hand, all the global production costs of the electric vehicle have risen dramatically in recent weeks. Lithium and nickel prices skyrocketed, as did aluminum, plastic, and so on. For example, the world’s largest battery manufacturer, the Chinese CATL, which is also Tesla’s main battery supplier, was forced to raise the price of lithium batteries for cars by thousands of dollars this month. The result has been a wave of sharp price increases in electric vehicle prices, and meanwhile in China, Tesla itself has raised prices by thousands of dollars within a few weeks.

Tesla’s plant in Germany will also have to deal with very high production costs due to rising energy prices for industry and trucking. Given the inflationary pressures growing in Germany even before the outbreak of the war in Ukraine, Tesla will probably also have stormy days ahead in terms of employment costs and labor relations.

Did prices in Israel fall?

These are problems that all the world’s electric car manufacturers are currently facing. The big question is whether the new German plant will bring with it an improvement in Tesla’s supply and prices in Israel, and at the same time an improvement in the competitiveness and accessibility of the entire electricity segment to the consumer – as happened when Tesla’s initial entry into Israel. The answer is that it probably will not happen in the short term.

Tesla’s plant in Germany is expected to produce only one model in the foreseeable future – the Tesla Y crossover. This model is not yet marketed in Israel, and after the sharp rise in its price in the world in the past month, Local. Currently, the price of the Tesla Y base model in Germany (LR) is a little over 60,000 euros before a government subsidy, and it is likely that in Israel the price will start at more than 300,000 shekels before additions.

Not only does this price stabilize the Tesla Y deep in the territory of luxury vehicles, but at the moment at least it also makes it expensive by a very significant margin from competitors in Europe. Thus, for example, the Y’s close competitor, the Volkswagen ID.4 in the corresponding version (GTX), now costs in Germany almost ten thousand euros less. Although European competitors are also expected to raise prices, at NIS 300,000 the marketing potential of the vehicle in Israel is very limited.

Theoretically, the production of the vehicle in Europe should “save” the Israeli customer the 7% customs duty imposed on Tesla vehicles imported from China. But if Tesla uses cars made in Germany with batteries made in China, which is likely to happen, it will pay full duty in Israel for them because the batteries are a very significant component in the total cost of the vehicle. Moreover, Tesla does not usually differentiate prices according to the country of manufacture of its vehicles, which means that the chances of a reduction due to the move to Germany are slim.

The lower transportation costs from Europe compared to China are also not expected to be reflected in a reduction in the price to the consumer – the difference between transporting a car to Israel from Europe compared to China is negligible.
Indeed, if and when the vehicles made by the German factory are marketed in Israel, and the problem of excess demand in the country is solved, it will mean that delivery times will be much shorter. Maybe even within a week instead of a month.

Not in Tesla’s head

Israel is not currently at the top of Tesla’s geographical priorities. The waiting time for the Y model in the United States, for example, currently stands at almost eight months, and it is not inconceivable that some of the production of the German plant will be directed there. It will be recalled that last month, the first 500 Tesla Y cars from China were supposed to arrive in Israel, but before they were unloaded in Ashdod, while they were still at sea, they were routed to another destination in Europe. Apparently to cover the company’s more burning commitments.

Bottom line, a new electric vehicle plant closer to Israel may improve Tesla’s availability and competitiveness in Israel in the long run. But with the current ratio of demand and supply in the electric car market in the world, it will be a long time before this has a significant impact in Israel.

Berlin is impressed by the new factory

The first Tesla car factory in Europe was inaugurated in the town of Greenhide near Berlin, in a solemn ceremony attended by German Chancellor, German Economy Minister and CEO Alon Musk.

Musk flew to Berlin earlier this week to “personally deliver the first cars” to their buyers, who were invited to the event. The plant will now gradually begin to increase production, until it reaches production of about half a million cars. At the same time, a large plant for the production and development of advanced batteries for electric vehicles is being built nearby. When construction is completed, the complex will be the largest vehicle factory in Europe.

Tesla’s entry into European production is expected to meet the growing demand for electric vehicles. Different countries have offered or are still offering generous subsidies to those who buy electric vehicles, due to the possible reduction in greenhouse gas emissions. Rapid charging infrastructure and subsidies for the development of batteries have played a role in the growth of industry in Europe in recent years.

In relation to Berlin, and especially in relation to the airport of the German capital, whose construction has been delayed for nearly a decade, the construction of Tesla’s new plant was done at record speed. Tesla has built the self-financed plant, at an estimated cost of four billion euros, “betting” that it will receive the necessary approvals.

“Musk showed us (how to do it),” the local Berliner Zeitung reported. “The American developer did not dwell on the cumbersome permitting laws in Germany, or invested in concerns about environmental pollution, groundwater, political considerations or labor unions.” Spiegel wrote that Tesla could serve as an example of the German car industry “which must change and adapt to the idea of ​​the end of the internal combustion engine”.

German Chancellor Olaf Schultz and Tesla CEO Alon Musk / Photo: Associated Press, Patrick Pleul / Pool

Musk announced in late 2019 that he had chosen the state of Brandenburg to set up the company’s first plant in Europe, after plants in the United States and China. This is the fourth plant in the world. He justified this with the “quality manpower in the field of automotive engineering in Germany”, in the fact that the location is close to Poland and will allow the attraction of quality manpower even outside Germany. Therefore, he expects an influx of workers to it.

The entry into Germany, whose car industry plays a critical role in the economy and was until a few years ago considered a world leader, is undermining the market. Tesla offers hundreds of high-paying jobs to automotive experts.

The opening of the plant, which covers an area of ​​750 dunams, places Berlin and Brandenburg on the map of the German car industry, which has so far been concentrated in Munich, Stuartgart and Wolfsburg. Formally, the state of Brandenburg estimates that about 5,000 jobs will be added to the region directly as a result of the plant opening, and thousands more jobs in the services sector. Berlin also has several thousand jobs in its territory. In total, the authorities expect about 10,000 workers as a result of the opening of the plant.

Assaf Oni, Berlin

By Editor

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