Tesla picks Germany over the UK for its European Gigafactory – Brexit to blame?

EV manufacture in the UK has been dealt a blow as Tesla boss, Elon Musk, has announced that the Tesla Gigafactory Europe will be built in Germany.

Never one to shy away from a PR opportunity, Musk made the announcement while picking up a Golden Steering Wheel Award for the Tesla Model 3 – in Germany.

“Berlin rocks!” he proclaimed, elaborating on the decision by saying, “some of the best cars in the world are made in Germany, everyone knows that German engineering is outstanding. That’s part of the reason why we’re locating our Gigafactory Europe in Germany. We are also going to create an engineering and design centre in Berlin.”

This is obviously fantastic news for Germany, and Europe as a whole, but it's also a massive blow to the UK which until relatively recently was being touted as the preferred location. Speaking to Auto Express, Musk pinned the blame on the dark cloud that continues to hang over the UK: “Brexit made it too risky to put a Gigafactory in the UK.”

Why it's a big deal

The term 'gigafactory' is affectionate slang essentially for any manufacturing plant that makes absolutely loads of batteries. Coined for Tesla's Gigafactory 1, which opened in 2015 in Nevada, three others have since opened – with 2 in the USA and 3 in China. Gigafactory 1 was built not only thanks to Tesla capital, but also hefty investment from Panasonic. In total, it has cost around $5bn and has the potential to produce enough lithium-ion batteries for 1.5 million EVs per year.

It's not just the vast sums of money in investment that makes gigafactories a big deal. Like any vehicle manufacturing facility there's the trickle-down effect with suppliers of everything from car parts to catering benefiting from the influx of people and cash. The local workforce gets a focal point of employment, and talented workers from across the globe will make a b-line for wherever such a facility is located.

As well as the factory itself in Germany, Tesla is throwing in the kitchen sink by adding the manufacture of powertrains and cars to its plans. Now given the kinds of benefits that could have brought to the UK – specifically the Midlands which needs such investment – and you're talking about billions of pounds worth of business that won't be seen on these shores.

Is Brexit really to blame?

Yes. But not completely.

It's impossible to argue that Brexit is just a convenient smokescreen as, like in many other industries, the mere uncertainty around Brexit is enough for big businesses to be hesitant to stake too much on the UK. Automotive manufacturers such as Nissan and Honda have pulled some of their operations altogether and scaled back others. The UK is not an attractive proposition when Brexit is so utterly unresolved and has little in the way of direction.

Tesla's decision to plump for Germany is also symptomatic of a wider issue in the UK which is extremely well explained by Wired. Essentially, we lack the workforce to meet the demand for around 30,000 highly skilled individuals to meet the 2021 target of Tesla Gigafactory Europe. There's a significant 'brain drain' here, with engineering suffering very badly, with the overall skills shortage continuing to get worse over the past 12 months. According to the Open University it cost the UK economy £6.3bn in 2018 – 2019 will be worse.

It's so bad that in Financial News, Edoardo Campanella, a Future of the World Fellow at the Center for the Governance of Change of IE University in Madrid, wrote: “Never before has an established democracy experienced a catastrophic loss of human capital during a period of peace and prosperity.”

Essentially, the only precedent for such an outward flow of skills and knowledge from a country is thanks to war, famine or other huge socio-economic upheaval. Pushing for businesses to build facilities like gigafactories will be one of the stimuli to reverse the trend. And it's critical that it happens, as a report by the Faraday Institute suggests that 114,000 automotive industry jobs could be lost by 2040 if the UK goes without.

As well as the workforce, Germany also has legislation both locally and nationally that promotes EVs somewhat better than that in the UK. This is not only by way of a commitment to subsidies on new EVs, but also local governments being able to ban petrol and diesel cars from urban areas under their control. Combined with a larger car market, this almost certainly helped sway Tesla.

Is there any good news?

It's hard to see through the gloom when there's so much uncertainty for the UK and those in charge spend rather too much time indulging in jingoistic rhetoric rather than making heavyweight, positive decisions and pledges. However, the government is evidently conscious of the need to push for an increase in EV, and EV component production here.

Already, the government has invested £108 million in a Battery Industrialisation Centre near Coventry. JLR has also invested a huge amount – hundreds of millions of pounds – in updating its facilities to build a new generation of EVs. The Tories have also bounded around a nice round £1bn investment in the UK's electric car business to help meet the net zero by 2050 target, but there's little information as to what exactly that £1bn will be spent on.

All-in-all it's not good news for the UK's EV industry, though. Whilst we could never rely on Tesla and Elon Musk to commit to the UK as a location for its Gigafactory Europe, it's impossible to separate Brexit from Tesla's decision to go with Germany rather than Blighty.

Despite all the doom and gloom, the UK automotive industry is resilient and full of fantastic people and ever-better infrastructure, and no shortage of ingenuity. The gigafactory-shaped space that has been left empty for now is also an opportunity for UK corporations and government to be proactive and make the business case to deliver it. Fingers crossed the willingness is there to do so.

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