While Tesla CEO Elon Musk is pushing for shareholders to accept his plans to purchase SolarCity, another company founded by Musk, that deal remains a work in progress so the acquisition of Grohmann Engineering could be the automaker’s first major buy. The company which specializes in automated manufacturing innovation and should help Tesla reach its goal of the mainstream and the production of 500,000 vehicles by 2018 when it begins production of the Model 3 next year.
Gigafactory and Grohmann to help Tesla meet its goals
While Tesla has begun production of the batteries it requires to meet production, its massive $5 billion Gigafactory in the Nevada desert won’t be completed until 2020 but is open at 14%. Musk knows that Grohmann will help Musk and Tesla produce the “machine that builds the machine” for its Freemont, California factory as well as other future factories.
The deal, whose financial details were not revealed with today’s announcement, should be completed in early 2017 assuming no issues arise with regulators in Germany and elsewhere.
Beyond Tesla’s lofty goal of 500,000 cars leaving its factories in 2018, the company has stated that it plans to double this production to one million units just two years later in 2020. That is unprecedented growth in the sector and would have Tesla showing the world something it has never seen accomplished.
Grohmann Engineering is based in Prüm, Germany and is led by its founder Klaus Grohmann. If the deal passes through regulatory hurdles as expected it will be renamed Tesla Grohmann Automation and will employ the existing staff of around 750.
“Accelerating a sustainable energy future is only possible with high-volume factories. They allow us to manufacture high-quality products with economies of scale, making them more affordable and accessible to the world,” Tesla wrote in a statement. “As the machine that builds the machine, our factories are so important that we believe they will ultimately deserve an order of magnitude more attention in engineering than what they produce.”
“We have increased the production rate at our Fremont Factory by 400% in four years, and we expect this acquisition to accelerate that growth rate,” Tesla said. “We are excited to have the Grohmann team join us in our goal of becoming the best manufacturer in the world to help accelerate the world’s progress to a sustainable energy future.”
Musk adds more details about Grohmann deal and European expansion
“We want to change the world with a lot of electric cars for a lot of people. That is what buying Grohmann is about,” said Musk after the announcement.
“This is about building the machine that builds the machine, which is more important than the [cars] themselves as volume increases,” said the Tesla CEO.
“The only way to make a large factory to work is to have significant automation,” continued Musk. “We will still have a large headcount but lots of automation and robotics.
“Automation is the way to make cars more affordable and accessible to as many people as possible. Economies of scale are the way to take the cost to something that people can afford to buy.”
It’s nearly impossible for Tesla to reach its goal of one million cars per year by 2020 without expansion so the Grohmann investment won’t be Tesla’s last in Europe and Britain (yes, technically still Europe even after the Brexit vote). For example, it’s well-known that Musk is scouting for an “ideal location” for an additional Gigafactory to join the one under construction in Nevada.
“Tesla is going to make some very significant investments in Europe – and the US of course,” Musk said recently. “There is no question of at least one, maybe two or three gigafactory locations in Europe in the future.”
“Currently Europe is a market for Tesla but we think it the right thing to do is to start producing cars there as soon as we can reasonably do,” Musk continued while acknowledging that its cars will become cheaper without shipping costs associated with American manufacturing.
Speaking of expansion into Britain, Musk spoke of the wealth of talent in Britain.
“A British engineering base would make a lot of sense for Tesla,” he said. “The Midlands, for example, has what I call a ‘phoenix industry’ of cutting-edge firms working in low carbon and driverless automotive technologies, linked both to universities and the motorsport industry.
“Just as automakers go to Silicon Valley to tap into software design, so too auto firms come to the UK for design and engineering skills and technology.”
Tesla is on the right track and even with its expanding operations has twice surprised investors with profitable quarters including at the company’s last earnings call.