In Depth

Elon Musk rules out Tesla factory in UK owing to Brexit uncertainty

Electric carmaker chooses Germany for Model 3 and Model Y production in Europe

Tesla boss Elon Musk has vetoed proposals for his company to open its first European factory in the UK, blaming the ongoing uncertainty of Brexit. 

Speaking to Auto Express at the Golden Steering Wheel Awards in Berlin, the South African-born billionaire said that the chaos surrounding the Britain’s exit from the EU made it “too risky” to site one of the carmaker’s so-called Gigafactory manufacturing plants in the UK. Instead, he revealed, Telsa is set to establish its European manufacturing base in Germany. 

“We’ve decided to put the Tesla Gigafactory Europe in the Berlin area,” Musk told attendees. “I come to Berlin a lot - Berlin rocks!”

The news “dashes hopes that the facility could be constructed in Britain, something Musk had previously suggested was likely”, says Autocar

Shortly after UK voters opted in 2016 to quit the EU, Musk said that Tesla had “a lot of respect for the British automotive engineering talent”.

“Just look at Formula 1 - it amazes me how much British talent there is in that,” he said. “We are likely to establish a Tesla engineering group in Britain at some point in the future.”

Why is Brexit such a headache for carmakers? 

If Britain leaves the EU as planned on the 31 January without agreeing a trade deal, it could throw the complex supply lines employed by carmakers in Britain into chaos. 

“Carmakers have supply chains that criss-cross the English Channel, and Britain is the destination of around 10% of vehicles assembled on the Continent”, thanks to the EU’s single market, The Guardian notes. 

In the event of a no-deal Brexit, carmakers could face tariffs on goods crossing the Channel, as well as tighter border checks that may disrupt the part imports that run on a “‘just-in-time’ basis”, adds The Telegraph.

The Society of Motor Manufacturers and Traders (SMMT) estimates that carmakers have already “wasted” more than £500m in preparations for a disruption caused by Brexit, which has been postponed twice, reports Forbes

Although the terms of Britain’s withdrawal from the bloc have yet to be agreed, Musk appears to have been unwilling to build a Gigifactory in Britain while the threat of high tariffs and border checks hangs over the nation. 

So why has Tesla picked Germany?

Speaking at the Golden Steering Wheel Awards on Tuesday, Musk said that the “outstanding” quality of engineering in German was “part of the reason why we are locating our Gigafactory” in the country.

The facility will be the company’s fourth major production plant, joining Telsa’s new factory in Shanghai, China, and two sites in the US - in Storey County, Nevada, and Buffalo, New York.

Company insiders told the Financial Times that Tesla’s budget cars, the Model 3 saloon and upcoming Model Y SUV, will be assembled at the European facility and that production would kick off in 2021. 

Autocar reports that the facility will also be used to manufacturer batteries and powertrains, and will house “an engineering and design centre”.

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