The case of Tesla's European Gigafactory and a huge international opportunity

July 6, 2019 by Paul Fosse

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In his excellent article on BMW, published by Dr. Holland last week, he refuted BMW's claims that battery materials are going to cost more and more as more materials are needed. He also explained why customers prefer Tesla's electric vehicles to the BMW i3. The failure of BMW, Mercedes and Audi to create compelling electric vehicles has created a big hole in the market.

In this article, I will talk about Tesla's huge opportunity to increase its international sales if they only follow their German competition in markets around the world. Even though Tesla is years ahead of its technology competitors, I suppose its sales will be equivalent to their sales today in 3 years. I know that Tesla sells to people who have never bought a luxury car, because I myself am an example of the "Tesla Stretch", according to which a person spends a lot more for a Tesla than for any other car she bought. Is it worth it. This article will focus on the opportunities offered by the global luxury market. All consumer customers who want to buy a Tesla and those who buy a Tesla to use it as a robotaxi are additional demands that Tesla will have to deal with.

Tesla plans to build Gigafactory in Europe

Elon Musk talks about using a Gigafactory on the 3 main continents for car sales (North America, Asia (China) and Europe) since 2016. Tesla has stated 2 major benefits and I add a 3rd.

1. Internal costs: Transportation costs, transport time and the huge cost of working capital of building a car and not being paid for it for 30 to 60 days, versus less than 30 days for cars manufactured and sold on the same continent.
2. External costs: Local taxes, tariffs and incentives for electric vehicles are often more favorable for vehicles that are partially or wholly manufactured in the country or commercial region where they are sold.
3. Buy localNationalism, patriotism, regionalism, no matter what you call it. People like to buy products made closer to home. They like to help keep people from their country or region.

With President Trump being more aggressive on the trade front, it increases the importance of the second and third points as countries take revenge for nationalism and forge punitive tariffs in the United States.

Until this year, all you said was just that, but this year, Tesla started and almost completed the construction of the first phase of China Gigafactory. Tesla is in the process of installing production equipment and plans to begin production of the cheaper version of Model 3 in the fourth quarter of this year.

The new Tesla Gigafactory 3 will enable it to serve the entire Chinese market, taking advantage of the above-mentioned transportation, labor, and reduced taxes, as well as making additional sales on the market. people only buying products made in their own region.

Should not the same reasons apply equally to Europe? I thought I would examine the sales of Tesla's 3 biggest competitors and see where the opportunities were.

As you can see in the graphs above, Tesla's direct competitors have 82% of their car sales outside the Americas, while Tesla, although Q2 2019 experienced a strong expansion of international sales, still has 33% of their sales outside their home continent. You can easily imagine that Tesla is making sales similar to those of its German competitors in all regions, once local manufacturing is established in the 3 regions.

If they complete their Chinese and European gigafactories by 2022 and each factory supports the production of 700,000 vehicles, Tesla would have a capacity of just over 2 million vehicles a year. This capacity is perfectly in line with the current sales of its competitors (which will probably decrease as Tesla consumes a market share) and perfectly matches the Elon forecasts described in this article.

New markets

For Tesla's sales to multiply by 10 from 2018 to 2022, they also need to expand to other mid-size markets such as Eastern Europe, Africa, South America and India. . Even smaller countries like Morocco, which we do not consider to be major automotive markets, have enough demand to support an active Facebook group with 942 members. With Tesla's highly efficient service model, for smaller countries like Morocco, they would need only a few banks of superchargers, one or two service centers and a few mobile service technicians to support whole country.

It would be a little more than what is needed to support a single state in the United States. For its part, Elon mentioned India as a country in which it plans to expand in 2020 at the recent shareholder meeting. India is a market that makes it very difficult to sell cars that are not locally produced and Elon has already commented on this. With total car sales of just 3.4 million in 2018, India is clearly not a large enough market to support its own Gigafactory. Elon will have to negotiate an agreement with the country to reduce tariffs, otherwise sales will be very low.

Conclusion

When you listen to CNBC (which I do not recommend), they keep talking about Tesla's next "demand problem". On the other hand, they never mention the opportunity for Tesla to develop internationally. Tesla has three major advantages over existing car manufacturers looking to locate their cars:

1. Teslas does not have emissions, which eliminates emissions tests
2. Tesla builds their cars in compliance with the safety standards of all regions and therefore does not have to locate them to meet safety standards.
3. They have to set up different charging ports and move the steering wheel in some markets today. While Full Self-Driving is deployed and approved in different parts of the world, Tesla will be able to remove the steering wheel of cars, or at least make it an electrical driving system, so that it does not does not have a physical connection to the system. car. Most localization requirements may change the language of the display. They can be made with live updates, allowing Tesla to change a car destined for Japan to Australia (the two markets driving right), if the charging ports are the same.

These benefits should allow Tesla to sell millions of vehicles a year with only 5 vehicles (S, 3, X, Y and Pickup) manufactured in only 4 factories. BMW, according to its 2018 annual report, uses 31 factories to do 19 models and does not even have a pickup. For an example of how Tesla covers 8 Toyota models with one (the next Y model), see the article I wrote after the unveiling of the Y model on March 14, 2019. Tesla n & # 39 will not have all the market niches, but they plan to cover the larger segments of the car and truck market with a much smaller and simpler production base, which will enable them to realize greater savings in scale than other manufactured products.

Use my referral link Tesla to get 1,000 miles of free Supercharging on a Tesla Model S, Model X or Model 3, here's the link: https://ts.la/paul92237 (but if someone's a problem other helped you, please use his link.).

Source: BMW Group 2018 Annual Report, Daimler Annual Report 2018, Audi Annual Report 2018

Keywords: Audi, BMW, BMW i3, Europe, Gigafactory, Mercedes, Tatyana Figueiredo, Tesla