Tesla launches its first European production plant in Germany

World’s biggest electric vehicle maker plans to hire 12,000 workers at the gigafactory to eventually produce up to 500,000 cars a year

Tesla chief executive Elon Musk speaks during the opening day of the Tesla Gigafactory in Gruenheide, Germany. EPA

Musk speaks next to German Chancellor Olaf Scholz and the prime minister of Brandenburg state, Dietmar Woidke, during the opening ceremony. AFP

The Tesla chief, right, was cheered as he oversaw the handover of the car maker's first German-made cars at the Gruenheide plant. EPA

Musk described the opening as "another step in the direction of a sustainable future". EPA

Tesla is likely to launch a test version of its new "full self-driving" software in Europe, possibly next year, the chief executive said. EPA

Musk dances as he hands over the first Teslas from the new factory. Getty Images

Musk said battery production will be a "challenge" next year and a "limiting factor" in the coming years. Reuters

Tesla cars are parked at the site of the new Tesla Gigafactory in Gruenheide, Germany. Reuters

Tesla was handing over the first Model Y cars made at its €5 billion Gruenheide plant to clients on March 22, the company said. Getty Images

The new Tesla Gigafactory is the company's first European production centre. Getty Images

Newly completed Tesla Model Y electric cars parked at the site near Gruenheide. Getty Images

The new factory is the largest investment in a German car factory in recent history. Getty Images

A road sign reading 'water protection area' next to the Tesla logo at the site of the Tesla factory. EPA

A road sign reading 'Tesla Street' at the new plant. EPA

A building under construction at the Tesla factory. EPA

At full capacity, the factory will produce 500,000 cars annually. EPA

Tesla plans to hire 12,000 workers at the plant. Bloomberg

Tesla will hand the first Model Y cars made at its €5 billion ($5.5bn) Gruenheide plant to clients on Tuesday, launching its first European production plant with the biggest investment in a German car factory in years.

German Chancellor Olaf Scholz will attend the ceremony alongside Tesla chief executive Elon Musk, marking a moment Mr Musk had hoped would happen eight months ago but local authorities say has come comparatively quickly for a project of its size.

The opening comes as Mr Musk has flagged Master Plan Part 3 for Tesla, which, he said, will map out scaling Tesla to "extreme size".

With plans to hire 12,000 workers, the German gigafactory and adjacent battery plant will become the biggest employer in the German state of Brandenburg, where it is based.

At full capacity, it will produce 500,000 cars annually — more than the 450,000 battery-electric vehicles that main rival Volkswagen sold globally in 2021 — and generate 50 gigawatt hours of battery power, surpassing all other plants in the country.

For now, Volkswagen holds the upper hand in Europe's EV market, with a 25 per cent market share compared with Tesla's 13 per cent. Mr Musk said boosting production would take longer than the two years it took to build the plant.

JPMorgan predicted Gruenheide would produce about 54,000 cars in 2022, increasing to 280,000 in 2023 and 500,000 by 2025.

Volkswagen, which has already received orders for 95,000 battery-electric vehicles in Europe this year, is planning a new €2bn EV plant alongside its Wolfsburg factory and six battery plants across Europe.

But its timeline lags behind Tesla's, with the EV factory opening in 2026 and the first battery plant in 2023.

Tesla received the final go-ahead from local authorities on March 4 to begin production, provided it met conditions on issues including water use and air pollution control.

The car maker came close to losing its water supply contract when local environmental groups filed a complaint against the Environmental Ministry challenging the licence it granted to Tesla's water supplier.

The court ultimately ruled that water extraction could go ahead, provided the ministry conducted a new public consultation.

The environmental groups may appeal the decision. Even if they do not, citizen initiatives have said they stand ready to oppose Tesla's planned expansion, citing everything from light pollution to water concerns.