What's going on?
America’s rootin’-tootin’ electric carmaker Tesla announced plans to open a new “gigafactory” in Germany late on Tuesday – and investors said “Ja, bitte”, sending its shares up on Wednesday.
What does this mean?
Up to now, Tesla’s been building and shipping all its vehicles from the trendy and tech-friendly Bay Area. But it’s claimed its spot in the world’s parking lot with a new manufacturing hub in China, and has considered building plants in a few European locations too. The UK, Tesla reckoned, is too risky with Brexit waiting in the wing mirrors, but Germany’s capital city – the European tech hub that’s also the birthplace of the internal combustion engine – flipped all the right switches.
Tesla likely hopes its local presence will boost sales in the country, especially given Germany’s newly introduced electric vehicle subsidies. But there are roadblocks ahead too: Tesla’s factory, which should be purring by 2021, will put it in direct competition with homegrown giants Daimler – owner of Mercedes – and the world’s biggest car manufacturer, Volkswagen.
Why should I care?
The bigger picture: Can Tesla scale the wall?
While it’s fair to say Tesla is a pioneer of the electric car industry, the question remains whether it can sustainably produce better cars than its long-established rivals. They’ve been perfecting their craft for decades, and aren’t about to break down because they now have to add a battery to their vehicles. So with plenty of competition from new and existing carmakers on the road ahead, it’ll only get tougher for investors to tell which car will cross the finish line first.
For markets: Investors turn the heat off Tesla.
Tesla’s better-than-expected third-quarter profit last month might’ve helped it shed the undesirable title of this year’s most profitable “short” investment – one whose share price investors think will fall (tweet this). That title may soon be carjacked by Japanese rival Nissan, which cut its profit forecast by 70% this week.