When you think e-vehicles you think Tesla.
And it’s this man: Elon Musk, who made electric cars cool.
Tesla is worth over 700 billion dollars and is one of the largest e-car manufacturers in the
world. But problems in its giga factories around the globe are raising eyebrows. Water and labor
are both big issues. We look to Germany, the USA and Mexico and ask... is the push
to drive greener vehicles fueling various crisis? We want to know... what is the true cost of Tesla.
Tesla is known as a disrupter in the auto industry. Its giga factories are
massive compounds, like here in Grünheide, a sleepy village about an hour outside of
Berlin. The facilities are designed to allow for faster and more streamlined production,
as Tesla aims to produce their slick e-vehicles. But all this heavy manufacturing on one
site means concentrated water consumption. The Tesla giga-factories started in the US,
where the company was founded. Then China and auto-manufacturing giant,
Germany. Most recently, Texas. Giga Berlin was a big step.
It's basically Tesla saying we're not scared of you.
Dan Ives is a Managing Director at WedBush Securities. An investment bank
based in the US. I reached out to him because he’s a big time Tesla watcher.
We're going for you Mercedes, BMW and others, and that's part of the Musks
mantra which is hard to argue with if you look at what's been accomplished last decade.
While the joke in Berlin at the time was that Musk, a noted Techno fan, just wanted an excuse
to visit some of the city’s most famous clubs, the location was excellent for Musk for many reasons.
The factory was built at breakneck speed, especially for Germany where bureaucracy,
approvals and permitting can move at a glacial pace, it opened its doors in 2022.
Germany has a long history of auto manufacturing. So, one resource that the country has in abundance
is well trained workers. On top of a location smack dab in the middle of the European Union.
At the end of the day, it's the center of the auto industry. Not just in Europe, you know many could
say globally. So, Berlin made a ton of sense, as well as the logistics of making cars in China and
shipping them to Europe was a logistical disaster. And that's why Berlin has been so important terms
that spider web logistically getting it throughout Europe as well as from a cost
perspective going to be significantly less now. But one resource that is not as abundant as one
might think... is water. Which was apparently laughable to Elon Musk in
2021 when he was confronted with the idea that his factory might contribute to water problems.
This region has so much water, look around you. But the local water supplier says there’s no
more water for further development stages. No, no, this is completely wrong. It's like
water is everywhere here. Does this seem like a desert to you?
Yeah, to some extent I have to say, I have some understanding for him
because it's a sort of bit strange. This is Martin Pusch his work looks
at waterway ecosystems and management. So, in the Berlin area, Brandenburg area,
we have 3000 lakes. So, if you arrive by airplane, you will see lakes everywhere. So,
we are rich in lakes, but we are poor in water resources. So, this seems to be contradictory.
So, despite being known for lakes and rivers, canals and streams, ground water levels in this
part of Germany have been declining for years due to climate change. So, even as the needs of the
area are increasing, water levels are sinking. Now, on the edges of the most populated city
in Germany, there’s a massive Gigafactory. And that concentrated production? It also
means concentrated water consumption. Not to mention, this area in Grünheide
is actually in a “water protection zone”. And there’s another problem. The kind of soil
that exists in this part of the country, which is really sandy and almost like a sieve. While
it allows rainwater to quickly reach aquifers, the sandy soil also makes it easy for pollutants
to drain down and contaminate drinking water. In case such pollutants would enter the aquifer,
it could be, let's say, spoiled and make unusable for drinking water purposes. Especially as most
pollutants cannot be biologically, biologically or microbially degraded.
Since the completion of the factory... there’s been intense scrutiny. German
magazine Stern reported about a battery accident starting a fire...
and contaminated water seeped into the ground. Or in 2023 the magazine also reported about
an illegal filling station that leaked 250 liters of diesel “uncontrollably.”
These are just a few of the reported instances. Environmental authorities
also seem to be slow to criticize the company. In only four of these cases involving many
different chemicals have State Environmental Authorities ordered soil samples to be taken.
But is this simply a culture clash between an American company and German bureaucracy?
So, the classical American approach. I'm a I'm a settler, I'm going westward, I'm using an area and
then if I've been using it then I move forward further. So, this is obviously not possible in
Central Europe. So, we are limited in space. Yeah, you have to deal more carefully with space and
other resources and that's why we have these relatively, strict environmental regulations.
It would only be fair to mention that the first company to build a factory in a water
protection area in Germany was Mercedes-Benz about a half hour away from the Tesla site.
But it’s not just a US vs Germany issue. Around the world Tesla has a rocky
history with environmental regulations. The LA Times reported about fines for a California
facility amounting to 275-thousand dollars from the Federal environmental protection agency.
It’s not only environmental issues that the various Tesla factories have in common,
but also building in areas with water problems. California, which is worldwide known for all the
problems, Texas the same. And also in China and near Shanghai even there is
let's say enough water volume, the quality is so bad, yeah, that you are not able to
drink the, the official drinking water there. But let’s also look on the other side of the
US border. Tesla is currently planning to build another giga
factory here in the state of Nuevo Leon, Mexico. That plant could open in the coming years... but
one big problem? In February 2022 the state where that facility would be located declared a state
of emergency due to the drought there. With two of the three dams that supply the metropolis of
Monterrey recording historically low levels. But as of now, Tesla says it’s still moving
forward with the facility in Nuevo Leon. Mexico is important because of the low cost
nature. To produce what I believe will be a sub 30,000-dollar vehicle Mexico is really the only
choice and that's why logistically where it is relative to Austin makes a ton of sense.
This area outside of Monterrey, like the area outside Berlin,
has an existing automotive sector with companies that supply American manufacturers like this one.
The company Kia is already operating in the state for example, so Tesla could also be
looking to court talent and take advantage of the infrastructure already in place.
It's eighty percent of the exports of the Auto industry goes to the United States,
it's around 15 billion US dollars per year in production and exports of auto
parts and some production of vehicles. Manuel Montoya heads the Automotive
Cluster of Nuevo Leon. And in comparison with
Mexico, Neuvo Leon is one of the main states that produces the cars and auto parts.
Montoya says water concerns are “challenging” for existing companies, but points to new
plans on the horizon and already in the works. The Governor of Nuevo Leon unveiled an $1.25
Billion dollar investment plan designed to ensure the state’s water supply through 2050 to invest in
water infrastructure like new pipelines and a dam. There's more water coming to the city and state
government of Neuvo Leon has already a plan for the next 20 years to supply the water
that know not only that companies but also the population would need for the next 20 years.
But nearly 5 million people live in metro-area Monterrey. There has already been water supply
rationing in recent years with media reporting that some water truck delivery
drivers have even been threatened with kidnapping. In a time where climate change is adding even more
stress, here in Germany, Tesla’s environmental record is raising concerns among activists.
Look environmental is always been a push-pull for Tesla that they need to
navigate. Clearly the green nature in terms going to electric vehicles a lot brighter
Spotlight, but it's a work in progress. So how do these recent and planned build
ups fit into the global Tesla strategy? The planned facility in Mexico and the
gigafactory build up in Germany will help Tesla compete on costs even as traditional
car makers turn to EVs and Chinese companies like BYD start to ramp up outside of China.
But let’s look at global sales. Tesla may have brand recognition, especially in the West,
but China is gaining with BYD making massive strides in 2022. Their sales more
than tripled compared to 2021. With German carmaker VW lagging behind in third place.
BYD, they continue to compete with from maybe a global share perspective. But when you think
electric vehicles, you think Tesla and that's been a big part of their success. Right now,
it's still Tesla's World. Everyone else is paying rent relative to globally and now it
should double down on that. That's why Germany, what they've done in Giga Berlin, is so important.
So not only are Germans and Americans making Teslas, they’re buying them too.
Over half a million were bought in the US last year, but another big buyer is Sweden.
So, in these countries, where Teslas or parts for the cars are made or serviced, there is unrest.
Like in Sweden, where workers are protesting. Swedish Tesla mechanics have walked off the job,
though their number is small, the movement has sparked solidarity efforts across not only Sweden,
but also Denmark. Dock workers are refusing to unload Teslas and for weeks the postal service
refused Tesla deliveries. The Swedish mechanics want the company to sign a collective bargaining
agreement, which would let them negotiate for higher wages, pensions and alike.
Workers’ rights are in issue in Germany too. German media has reported numerous concerns among
Giga-Berlin employees about working conditions. From the USA, especially from the CEO probably
comes a lot of pressure to deliver numbers to produce cars and to sell those cars and yeah,
in in the end to provide better numbers for the shareholders, right. So,
so that the stock goes up and he can buy another Twitter or whatever he wants to.
Gunnar Hemmann is a member of the IG Metall Union in Germany and was
employed by Tesla. Musks’ company has so far blocked unionization at its factories, but a
work council is in place at Gigafactory Berlin. The non-union Nature's been part of the success
of Tesla. I mean, they're not I went to have the overhang at some of these other automakers have by
having unions and that's really how Musk built it. And I don't see that changing anytime soon despite
UAW and others that will go after them, but they go to the beat of a Different Drum and that's been
a big part of their success being non-union. We wanted to know, what do the people who
live in and near Grünheide think about the factory and the working conditions?
If you get a lot of people in really quickly, it's going to be a lot of stress
for everybody. It is difficult. I mean, but I do think that it's like teething problems
that will solve be solved in the future. Volker: Yes, I've heard that ambulances
drive up there every day, that there are very often injured people from the media, yes.
We know someone. He used to work for Tesla, but he quit straight away because it didn't work out. I
don't think he even got work clothes, yeah. Tesla made a worldwide profit of around
12 and a half billion dollars in 2022. But what is the true cost of buying one of
these futuristic, cool all-electric vehicles? Well, hosting a Gigafactory bring jobs,
but also working conditions that can lead to injuries like here in Germany.
A factory with such a large footprint can also strain local resources and
make regions experiencing drought face even greater water limitations.
We did reach out to Tesla for interviews and for comment, they did not respond to those requests.
Tesla has been an innovator for years, so, there’s still room to improve. And water usage or workers
conditions could actually be another frontier that this American company confidently strides into.