Municipal Committee Balks Tesla's (TSLA) Giga Berlin Expansion
In a major setback, EV giant Tesla Inc. TSLA has to hold back on its expansion plan of the Berlin Gigafactory.
Tesla had intended to increase the factory by one-third and expand the nearly 750-acre factory site by another 250 acres to develop a freight depot, besides other factory parts. In May, the automaker sent in an application to increase the factory by a third by beginning construction on a further 100 hectares from the existing plant.
However it seems that the expansion plan is enmeshed in bureaucracy as the municipal council of Grünheide, the city near Berlin where the Gigafactory is located, has indefinitely delayed the vote on the planned expansion.
On the contrary, the Grünheide committee had given its nod to the extension plans in June and provided the green signal to begin the execution of the same. Yet, shortly before a recent council meeting, the item was removed from the agenda. The council claimed that it does not have enough clarification, so the development plan will also be opted out for an upcoming meeting.
Tesla has been ramping up production at Gigafactory Berlin from 1,000 vehicles per week to 5,000 vehicles by the end of the year. It has set an ambitious goal of churning out 1 million vehicles per year at the factory.
In July, it was reported that the EV magnate decided on a production halt of Gigafactories in Berlin and Shanghai to ramp up output capacities. It was told that Tesla intended to complete the expanded production lines by early August. The Giga Berlin started a two-week production hiatus on Jul 11, with the company planning to double its production rate in August.
Presently, the reasons for the delay are not quite clear, although the ripple effects of the ongoing Ukraine-Russia conflict may be hinted at. Russia has drastically cut down gas supplies to Europe in general and Germany in particular. Tesla’s intensive development plans call for a heavy requirement of energy. In light of a volatile market situation, Germany is likely acting cautiously in approving the expansion plan.
Giga Berlin was on a production spree in June, building around 1,000 Model Y units in a single week while producing more vehicles globally than in any month in its history.
Despite the record production month, Tesla chief, Elon Musk, had put forth financial concerns over the past few months, citing that the automaker did not have a smooth second quarter and that the company’s new factories weigh on finances. The current situation undoubtedly adds to the woes as it is uncertain whether it would impact Tesla’s timeline for production boost.
Shares of TSLA have risen 20.1% over the past year compared with its industry’s 2.5% rise.
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Zacks Rank & Other Key Picks
TSLA carries a Zacks Rank #2 (Buy), currently.
Some other top-ranked players in the auto space include Yamaha Motor Co. YAMHF, sporting a Zacks Rank #1 (Strong Buy), and BorgWarner BWA carrying a Zacks Rank #2, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.
Yamaha has an expected earnings growth rate of 1% for 2023. The Zacks Consensus Estimate for current-year earnings has been revised 11.6% upward in the past 30 days.
Yamaha’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one. YAMHF pulled off a trailing four-quarter earnings surprise of 47.95%, on average. The stock has declined 27.6% over the past year.
BorgWarner has an expected earnings rate of 2.9% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised 0.7% upward in the past 30 days.
BorgWarner’s earnings beat the Zacks growth Consensus Estimate in all the trailing four quarters. BWA pulled off a trailing four-quarter earnings surprise of 29.45%, on average. The stock has declined 11.9% in the past year.
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