November 12, 2019 / 9:00 PM / 7 months ago

UPDATE 3-Tesla to build first European plant in Berlin, Musk says

(Adds details, comments, background)

Nov 12 (Reuters) - Tesla Inc Chief Executive Officer Elon Musk said on Tuesday the electric-car maker will build its first European factory as well as an engineering and design center in Berlin.

By building a plant in Germany, Tesla will be able to add the "Made in Germany" accolade. Berlin also has earmarked financial support for manufacturing electric car battery cells.

Musk, in a tweet, said that Tesla will build batteries, powertrains and vehicles, starting with Model Y lower-priced sports utility vehicle at the Berlin factory.

Last month, Tesla said it expected its European factory to start production in 2021. The carmaker is also gearing up to open its factory in Shanghai.

Musk made the announcement about the Berlin plant at the Golden Steering Wheel awards ceremony in Germany. He said the factory will be near the new Berlin airport. Musk had said in June last year that Germany is the frontrunner for its first factory in Europe.

"Tesla is coming to Brandenburg with a big investment," Dietmar Woidke, state premier of Brandenburg, which surrounds Berlin, said in a statement. "We lobbied for this for a long time in intensive talks and with good arguments."

The company is yet to prove it can be consistently profitable. Tesla has said it expects to be cash flow positive, but faces big investments with the launch of new factories and development of products including a pickup truck and a semi-truck.

Musk's appearance at the awards ceremony is another example of Tesla's efforts to co-opt marketing tactics employed by German manufacturers, which have a reputation for quality.

Tesla, for instance, has tested its cars on the Nordschleife, the notorious northern loop of the Nuerburgring racing track, as a way to burnish the brand's reputation for reliability and sporting prowess.

The company has an engineering firm in Pruem, Germany, that specializes in automated manufacturing systems for battery-making plants.

In October, Reuters reported that Tesla is aiming to start production for its factory in China amid uncertainties around orders, labor and suppliers.

Reporting by Edward Taylor in Frankfurt, Paul Carrel in Berlin and Ayanti Bera in Bengaluru; Editing by Shounak Dasgupta and Arun Koyyur

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