Elon Musk and Tesla Inc (NASDAQ:TSLA) will cut the ribbon for the opening of its Giga Berlin-Brandenburg factory on Tuesday, in what analysts said established a beachhead in Europe offering the potential to produce around half a million electric vehicles (EVs) per year.
A ceremony to celebrate the opening of the plant will be attended by Musk and German Chancellor Olaf Scholz.
Musk said having a factory in Europe "makes a huge difference to capital efficiency" and comes as the billionaire said he was working on a Master Plan Part 3 for Tesla, which he said will map out scaling Tesla to "extreme size".
Excited to hand over the first production cars made by Giga Berlin-Brandenburg tomorrow!
— Elon Musk (@elonmusk) March 21, 2022
"We view the opening of Giga Berlin as one of the biggest strategic endeavors for Tesla over the last decade and should further vault its market share within Europe over the coming years as more consumers aggressively head down the EV path," said analyst Daniel Ives at Wedbush.
After German authorities flicked on the green light, Tesla recently confirmed that deliveries of its Model Y vehicle will begin from Berlin on 22 March.
This has removed a "major overhang" on the share price over the past few months, said Ives.
"The red tape and headaches seen around the delays/disputes opening up this flagship European factory has been frustrating for investors to watch unfold as many on the Street were doubting if Giga Berlin ever actually would open.
"We cannot stress the production importance of Giga Berlin to the overall success of Tesla's footprint in Europe and globally, as the current Rubik's Cube logistics of producing cars in China at Giga Shanghai and delivering to customers throughout Europe was not a sustainable trend."
With more established car manufacturers racing to catch up in the EV race, including Volkswagen announcing its own unit has reached profitability already, competition for Tesla is "increasing from every angle" with others doubling down on their EV ambitions, the Wedbush analyst said he views Giga Berlin "as a major competitive advantage for Tesla to further build out its supply footprint in this key region".
???? at Giga Berlin pic.twitter.com/ojIvG9cg4F
— Tesla (@Tesla) March 9, 2022
Because of supply chain bottlenecks, the Texas-headquartered company is facing 5-6 month delays for Model Ys and some Model 3s in different parts of the globe, the analyst noted.
Berlin and the opening of another new Gigafactory in Austin, Texas in early April will help solve this problem, Wedbush believes.
"The chip shortage remains a moderating issue for Tesla and the global auto industry into the rest of 2022, although clearly the volatile and heartbreaking invasion in Ukraine and its impact on broader Europe remains an issue the Street will closely watch in the coming weeks/months."
With these two new factories up and running, Wedbush believes that by the end of 2022, Musk will be able to call upon sufficient capacity for an annual run rate of around 2mln EVs, up from just under 1mln in 2021.
"While supply chain issues were a major drag on overall unit growth for Tesla in 2021, we believe over the coming year this dynamic will significantly moderate with potentially 1.5mln-plus units now within reach annually for 2022," analyst Ives said.
"While China will be a key growth driver, we believe demand is rapidly building for Tesla's Model Y in the US and Europe with 2022 so far looking like another 'breakout year' for Tesla and the EV industry."
Wedbush reiterated its US$1,400 price target for the shares, versus a stock price down 23% since the start of the year to US$924.8.
Musk's said the subjects of his new Master Plan 3 will be "scaling [Tesla] to extreme size, which is needed to shift humanity away from fossil fuels," while he will also cover AI, and his other projects, SpaceX and The Boring Company.