When Elon Musk was asked last year whether the factory Tesla Inc. was constructing in Germany would deplete the area’s water supply, he broke out in laughter and called the notion “completely wrong.”
Six months later, water is one of the primary reasons the plant still is not producing vehicles.
While Musk in August flippantly pointed to water “everywhere” around Berlin, the region is suffering from falling groundwater levels and prolonged droughts due to climate change.
That has sparked a legal challenge that will go to court next week and an acknowledgment from local authorities that supplies will not suffice once Tesla ramps up the plant.
The issue has the potential to further delay or even stop the 5 billion euro ($5.7 billion) project in what could turn into a costly setback to the automaker’s expansion.
“Tesla will increase the problem for sure,” said Irina Engelhardt, who heads the hydrogeology department at Berlin’s Technical University. “There might not be enough water for everyone.”
Ramping up the factory in the eastern state of Brandenburg is key to Tesla’s global ambitions.
The EV maker needs a manufacturing base in Europe to supply the region’s fast-growing electric-vehicle market, which is expected to remain much bigger and more competitive than the U.S. for years to come.
While Tesla has erected the plant at breakneck speed, it’s still waiting for final approval from local authorities just as Volkswagen Group, Mercedes-Benz and Stellantis broaden their own EV lineups.
“The current water supply is sufficient for the first stage of the factory,” Brandenburg Economy Minister Joerg Steinbach said in an interview. Once Tesla expands the site, “we will need more.”
Musk, 50, has been on a charm offensive to promote the plant Tesla has said will eventually produce batteries and as many as 500,000 cars annually.
He has tweeted in German, rubbed shoulders with local politicians and threw an Oktoberfest-style county fair at the construction site in October.
But he has also frustrated authorities with several last-minute changes to the factory and sparked outrage in Germany last week for posting a meme evoking Adolf Hitler.
The country’s vehicle regulator said this week it’s investigating one of Tesla’s driver-assistance features.
Much of the optimism about Tesla’s growth prospects this year rests on the company’s ability to get the factories it’s been constructing near Berlin and Austin, Texas, up and running.
When Credit Suisse analysts raised their share-price target to $1,025 from $830 last month, the first factor cited was capacity expansion.
The Berlin plant “arguably serves as Tesla’s most critical incremental source of capacity,” the analysts led by Dan Levy wrote in the Jan. 18 report. Ramping it up should bolster supplies in a market that’s been “ground zero for the global EV inflection.”
German politicians have backed the investment because it promises thousands of new jobs in a region that has little heavy industry.
Yet progress at the site in the small town of Gruenheide has been slower than hoped, with the pandemic, red tape and backlash from locals over water usage delaying the start of production by several months.
