Visitors look at Tesla cars during the ‘Gigafest’ open house county fair-style event, in which local residents were invited to visit the Tesla automobile company’s Giga factory site in Gruenheide, near Berlin.
Adam Berry/AFP via Getty Images
The German automotive news outlet Automobilwoche reported Monday that Tesla’s new manufacturing facility in that country will start production in December.
Tesla’s German plant is home to another giga press that will manufacture the chassis of a Tesla (ticker: TSLA) vehicle in one or two pieces. That’s a big change from the traditional stamping and welding of car underbodies.
Less parts and processing can mean lower cost of production.
The news of a startup has Tesla investors energized. Tesla stock was up 2% in premarket trading to about $1,103 a share. The entire market, however, is rebounding from Friday’s steep decline catalyzed by the new Covid variant dubbed Omicron.
Dow Jones Industrial Average
futures rose 0.9% and 0.7%, respectively.
The S&P dropped 2.3% on Friday, the Dow gave up 2.5% and Tesla stock dropped 3.1% after the revelations about Omicron.
Tesla has other giga presses and has manufactured some of its car parts using the technology. The new Germany facility, however, will take die-casting—which is essentially how hot-wheels cars are manufactured—to another level.
Those giga press advancements are one reason Morgan Stanley analyst Adam Jonas used to justify Tesla hitting $1 trillion in market capitalization back in October. Jonas believed the market was recognizing the idea that Tesla is not only a leader in vehicle electrification, but in vehicle manufacturing too.
He rates shares Buy and has a $1,200 price target.
The start of the German facility had been delayed by environmental permitting. That process should be wrapped up in the next few days, according to Automobilwoche.
Tesla currently manufactures cars in two plants: One in Fremont, Calif. and another in Shanghai China. Plants in Germany and Texas are about to come online, essentially, doubling Tesla’s capacity to roughly 2 million units a year.
Tesla is expected to deliver about 900,000 vehicles in 2021, up from about 500,000 in 2020. Next year, Wall Street expects 1.3 to 1.4 million vehicle deliveries. The company will need its new capacity.
Chief Financial Officer Zachry Kirkhorn explained to investors on the company’s third-quarter earnings conference call that the first goal is to get a plant producing about 5,000 vehicles a week. From there the goal is to hit about 10,000 a week which implied about 500,000 vehicles produced a year at each plant.
Exactly how fast Tesla can ramp capacity at new facilities—and what it will do to vehicle costs—will be something investors are on the lookout for in 2022.
Tesla stock is up 1.6% in premarket trading Monday.
Write to Al Root at email@example.com