Tesla CEO Elon Musk and CTO JB Straubel are in Germany today to announce the acquisition of a German engineering group, Grohmann Engineering. Following the announcement, they held a press conference during which Musk emphasised that Tesla is planning “significant investments” in Germany and the conversation quickly moved to Tesla not only investing in engineering in Europe, but also in production.

Musk confirmed that Tesla plans to choose a location for ‘Gigafactory 2’ in Europe next year and he added that the factory will combine both the production of batteries and complete cars.

It’s an interesting development considering the Gigafactory concept was originally only supposed to manufacture battery cells and packs, but we recently learned that Tesla is planning drive system production lines at the Gigafactory 1 in Nevada.

Now it looks like Tesla will take it a step further and vertically integrate the entire production process in one plant – for the ‘Gigafactory 2’ at least.

During the call early this morning, Musk made it clear that Tesla’s current focus is to bring the Model 3 to production, but he also said that through that process, the company is trying to reinvent their manufacturing strategy now referred to as “the machine that builds the machine”. The acquisition of Grohmann Engineering is part of Tesla’s effort to design that “machine” which will first come alive at Tesla’s Fremont plant, but he added that it will also eventually be deployed in Europe:

“This is something that we plan on exploring quite seriously with different locations for very large scale Tesla vehicles, and battery and powertrain production – essentially an integrated ‘Gigafactory 2’.”

He later referred to the plant as a “combined vehicle and Gigafactory”.

Musk clarified the timing of the new project and said that it will be once Tesla has “a clear handle on Model 3 production next year”. Tesla plans to start Model 3 production in “mid-2017” with volume production in “late-2017”.

Interestingly, he continued by saying:

“It is quite a significant scaling up of the rate because we are going from 100,000 cars a year to 600,000 cars a year in a very short period of time.”

Tesla has generally been using the figure of “500,000 cars per year” for its production capacity once the Model 3 is at volume production. Musk expects Tesla Fremont to support between 500,000 and 1 million vehicles per year, while the Gigafactory 1 should be able to keep up with battery production for the vehicle demand and Tesla Energy products.

Again on the subject of a European Gigafactory, Musk added:

“There’s no question that long-term Tesla will have at least one – and maybe two or three – vehicle and battery factory locations in Europe.”

Where do you think those locations will be? Let us known in the comment section below.

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