American EV giant Tesla seems to be swayed by the government incentives under the Inflation Reduction Act, as it suddenly canceled its German battery production plans to pursue the United States.
Brandenburg economy ministry confirms speculations
Tesla initially announced plans to develop its own 4680-type battery cells at Gigafactory Berlin, with an annual production target of 50 GWh. However, the automaker has now decided to abandon the original plan to take advantage of the incentives offered by the US on domestic battery manufacturing.
It is an important move for Tesla as it would need to produce or source its battery cells from North America to secure the full $7,500 federal tax credit.
On February 21, the Brandenburg economy ministry finally confirmed that Tesla paused its battery plans in Brandenburg, Germany, and would now shift its production capacity to its home market.
“Tesla has started its battery system production in Gruenheide and is preparing to manufacture battery cell components.
The company has prioritized further production steps in the USA because tax incentives make business conditions more favorable there.”
Brandenburg economy ministry (via Reuters)
Notably, Tesla already began production in its Gigafactory Berlin last week, as announced by Economic Minister Jörg Steinbach, stating that the plant is “buzzing” with operations.
It is also worth noting that Tesla has difficulty scaling up 4680 battery cell production at its Fremont and Texas plants. Industry experts suggest Tesla struggles because of its new and “unproven” strategies.
Tesla’s previous plans
Tesla CEO Elon Musk declared targets in March 2022 to hit volume production by the end of this year. In 2020, he stated plans to make the Giga Berlin the world’s largest battery factory.
In late January, Tesla also disclosed plans to invest over $3.6 billion in Nevada gigafactory complex expansion. The automaker aims to develop two new facilities for the mass production of the Semi electric truck and the new 4680 battery cell.
Nonetheless, pursuing the US to produce the 4680 battery cells makes sense considering the substantial incentives and its impact there. Tesla will use the innovative battery cells to scale up Model Y production and debut the Cybertruck by the end of 2023.
