While Tesla’s China Gigafactory (its first overseas plant) is still under construction, the electric carmaker is already checking out locations for its next offshore home in Europe. And it’s closing in on a few towns in northwest Germany.
Per German newspaper Rheinische Post‘s report on Sunday, Tesla has examined potential factory sites in the state of North Rhine-Westphalia. The company is also looking at North Rhine-Westphalia’s neighboring state of Lower Saxony, the region’s Economy Minister Bernd Althusmann said last week.
If settled, the German facility would be Tesla’s fourth Gigafactory globally. The company currently has two Gigafactories in the U.S.—one in Reno, Nevada and the other in Buffalo, New York—with a third one near completion in Shanghai, China.
Tesla CEO Elon Musk first teased plans to build a European factory in 2016, following Tesla’s acquisition of local company Grohmann Engineering.
Last summer, Musk shared an update regarding the plan on Twitter, saying “Germany is a leading choice for Europe.”
Having a local production hub in Europe to satisfy local demand has a few major benefits for Tesla.
First, the continent is one of Tesla’s fastest growing markets. In the first half of 2019, the electric carmaker tripled sales in EU countries despite a slowdown in the region’s overall auto market.
Then, like China, moving production near its overseas customers could help Tesla avoid the risks of an increasingly volatile trade war between the U.S. and the rest of the world.
In March of 2018, President Donald Trump announced his plan to impose tariffs of 25% and 10% on steel and aluminum imports from most countries, including the European Union. The tariffs on the EU took effect on June 1, 2018. In response, the EU countered Trump’s steel tariffs with a 25% tariff on $3 billion of American imports, which went into effect on June 22, 2018. (Automobiles were not affected in that round of tariff hikes.)
Trump then threatened to impose tariffs of up to 25% on automobiles coming from Europe. But in May of this year, he decided to delay these tariffs for six months to allow both sides more time to negotiate a trade deal.