why elon musk's berlin gigafactory was a dumb move it wasn't but i do think it's helpful to realize
that this article is coming from the same jim collins that wrote an article back in 2020 titled
lookout tesla volkswagen and the big boys are coming for you where he ended the article with
watch out elon the big boys are coming for you sellside tesla analysts will never realize that
never this current crop is not capable of realizing anything or producing any type of
independent thought so you would better make your investment decisions yourself and you gotta hand
it to him this guy's got a really good sense of humor and i can appreciate that can't take
life too seriously that being said i think he's totally wrong giga berlin is a fantastic idea and
i don't think tesla is going to be crushed by the competition let's address giga berlin first right
now tesla is significantly supply constrained meaning that if they could make more vehicles
they would sell more vehicles and that's true in all of their markets including europe china
and the united states if you're in europe and you buy a tesla it's being shipped from either the us
or from china because those are the only places that teslas are being built so at a very basic
level if tesla can't meet their demand in the u.s or china every single car that's being shipped
to europe is one that could have been sold into the region where it was manufactured
that's important because shipping cars is pretty expensive and even elon musk has said there are
a lot of inefficiencies occurred in not producing at least on the continent that you're selling into
there's a reason that companies like toyota and volkswagen have manufacturing plants on every
single continent that they sell to the author says that elon has decided to open a factory that is
quite far from european industrial infrastructure and what is in my experience the highest labor
cost country in the world how was that a good idea it wasn't and if labor cost was the only
factor then he'd be right but there are so many other factors than just labor there are import and
export costs tariffs taxes regulation engineering talent supply chains and the list keeps going as a
global data automotive analyst put it locating the plant in germany gives tesla an expensive
but highly qualified workforce there is a huge amount of value in the automotive manufacturing
and supply chain clustered on germany that tesla can draw upon and the made in germany tags still
carries significant weight in the premium car market if labor costs were the only thing
automotive companies cared about then you wouldn't see companies like vw opening up a brand new
factory in the united states which also has a very high labor cost turning a complex decision like
building a massive factory in europe into a single variable like labor cost is overly simplistic and
is almost guaranteed to make you miss the point right now europe is the second largest ev market
in the world with china being the number one spot and moving into europe will allow tesla to sell
more cars into china because they won't have to export as many cars from their shanghai plant to
europe the author does make the broader point in the article that china is much less worried about
environmental regulations which makes them easier to move quickly and expand in which i
think is totally true europe and the us can have the problem of having too much bureaucratic red
tape which can make getting things done a tedious task but that doesn't mean you ignore the european
manufacturing market completely i think tesla is playing it incredibly well with building their
china factory first and then going to europe the fact is that tesla wants to have manufacturing
basically everywhere which means even though some regions may be more expensive and difficult to
work in the benefits outweigh the cost now we should address the idea that collins is putting
forth that legacy auto is coming for tesla and tesla won't be able to compete we've covered this
exact idea a bunch on this channel so i'll try and keep this brief people have been saying since at
least 2016 that legacy auto is coming for tesla and that tesla's about to be crushed and that
simply hasn't happened in fact we've experienced quite the opposite while basically every large
automaker now has its own battery electric vehicle they haven't been able to slow down tesla's growth
whatsoever we can see that pretty clearly with tesla and volkswagen where volkswagen has been
making a pretty massive effort towards evs and despite their much larger manufacturing presence
and global reach they haven't been able to catch up to tesla in fact if we look over the last
couple years of data tesla is actually increasing their sales lead although to be fair it does get
more complicated if you include plug-in hybrids in these numbers we're just going to look at
all electric evs in 2020 volkswagen sold around 230 000 all electric vehicles compared to tesla's
half a million then in 2021 volkswagen sold 450 000 to tesla's 940 000. while sales is only one
metric it doesn't exactly look like volkswagen is crushing tesla in fact it doesn't even look like
they're slowing tesla down and volkswagen is the best example of legacy auto transitioning to ebs
all the others look worse by comparison i can go into a bunch more data but i think tesla's
year-over-year growth speaks for itself they've grown faster than what most people thought was
possible i mean think of it this way how is a relative newbie to the automotive game adding more
ev manufacturing per year like more units not just more percentage than the next best legacy auto
company when those legacy auto companies already have factories and employees and supply chains
and experience and every single other advantage possible but what i find hilarious is that the
article's author collins wrote this in a recent article about tesla tesla is getting absolutely
blasted by volkswagen in europe vw sold about 50 more bevs on the continent in q1 2020 than
tesla did in addition i believe that vw sold more than 10 000 bebs in europe in april while tesla
delivered about 2 000 cars and that general idea is totally true volkswagen was and is outselling
tesla in europe to no small degree the logical answer for tesla is then to build a manufacturing
plant in europe so they can increase their volume in that market yet when tesla does exactly that
the author then says tesla for a number of reasons including the high labor costs in europe shouldn't
be doing that oh and by the way volkswagen has 19 production plants in europe despite that high
labor cost and also i'll say this while volkswagen has been outselling tesla in europe recently
i wouldn't be surprised if that trend turns around because of giga berlin it'll take some time for
production to ramp up but once it does that's at least half a million more evs in europe and that's
no small number especially considering in 2021 volkswagen only sold around 450 000 all-electric
vehicles globally not just in europe so giga berlin is really going to be putting the pressure
on volkswagen in the eevee space once ramped that one tesla factory will be able to produce
more evs than volkswagen sold globally in 2021 that's not something vw can just ignore that's
tesla going head to head with vw's home market and you can bet they're going to be angry about that
and while giga berlin will allow tesla access to a much larger market share in europe it'll also free
up their giga shanghai to focus solely on sales in china giving them major benefits so to jim collins
saying that gig of berlin is a bad move for tesla while saying that a major reason tesla's stock is
overvalued is because volkswagen is outselling them in europe you can't have it both ways this
european factory can single-handedly match or exceed vw's european sales while allowing tesla
to increase their sales in the u.s and china in the grand scheme of things if tesla wants
to compete in basically every region which they do then they have to have manufacturing plants
in basically every region and that's exactly what they're doing collins is recommending readers to
if you want to paris trade long china short europe short tesla and go long neo and far
be it from me to give an investment advice but i'll say this if you want to bet against tesla
be my guest but tesla has been the most shorted company for years in the past and so far they've
proven all those short sellers wrong historically if you've shorted tesla you have absolutely
unequivocally lost your shirt and i'm not saying tesla can't go down in stock price but there are
so so so many safer and better investments out there than betting against tesla alright peace