In view of the benefits of convenient contact with local supply chain and policy support of host governments, Tesla has resolved to establish a Gigafactory in Europe, its first overseas production base, in order to penetrate the market, with Germany having emerged as a front runner among a number of possible sites.

The decision has been made, in the wake of the rollout of supportive policy for electric cars by various European countries, which will accelerate the development of the electric-car market in Europe, boosting the scale of the local battery market to 250 billion euros by 2025. As a result, some major Asian battery suppliers, including CATL and Samsung, have stepped up their investments in Europe, including the setup local branches.

Elon Musk, Tesla CEO, confirmed on Twitter, that Germany is one of the optimal sites for the company's projected European factory. The factory is likely to be located in area bordering France and near Belgium. Presently, the company has an operating center in Prum of Germany, 100 kilometers away from the border with France and 30 kilometers from Belgium.

Prum is also the site of the headquarters of automaker Grohmann, acquired by Tesla in 2017. Grohmann also produces chip production equipment, airbag sensors, power steering controllers, and lithium-battery modules, on top of assembly robots installed at Tesla's US Gigafactory. Should the projected Gigafactory be sited in Prum, it will benefit from lower transportation cost for components and parts, boosting production efficiency and nimbleness.

It is not clear that whether Tesla will continue partnering with Panasonic, its battery supplier, for the projected Gigafactory in Europe, as what it did for the plan of building three new Gigafactories unveiled previously.

Asian suppliers have emerged as dominant players on Europe's increasingly competitive battery market, as evidenced by the choice of LG Chem, Samsung, and CATL by Volkswagen, Europe's largest automaker, as its battery suppliers. In order to obtain better policy support, CATL is in talks with host governments for setup of factories in Europe. Faced with competition from Asian and other suppliers, TerraE of Germany and Northvolt of Sweden have announced plans building large-scale lithium-battery factories in Europe.

(Collaborative media: TechNews, first photo courtesy of Tesla)