Elon Musk announced that Tesla (NASDAQ: TSLA) considered launching its first large European plant in the United Kingdom.
However, Tesla decided against picking the United Kingdom as the location due to uncertainty created by Brexit.
Brexit Uncertainty
Elon Musk said that picking the United Kingdom as the location for Tesla’s European plant would be a mistake.
According to Mr. Musk, it would be way too risky in a period of high economic and regulatory uncertainty in the United Kingdom.
Finalist : Germany
After considering multiple locations, Tesla decided to open its European plant in Germany.
The new plant which will host a factory as well as a design centre will open up near Berlin.
The new Tesla plant will create thousands of jobs in Germany.
It will mainly focus on producing batteries and cars.
Tesla has a huge growth potential due to increasing consumer demand for electric cars.
The new European plant is likely to draw investment from multiple sectors due to its growth potential.
The plant would have benefited the United Kingdom economy to a large extent if Tesla decided to open it in the United Kingdom.
Risk
Brexit uncertainty caused hesitation among many manufacturers.
Earlier this year, Nissan (TYO: 7201) raised concerns that its European business model would become unsustainable in the case of a no deal-Brexit.
Furthermore, other companies such as Sony (TYO: 6758), Ford (NYSE: F) and Barclays (LON: BARC) moved significant portions of their capital to other European capitals due to Brexit uncertainty.
No-deal Brexit implies that companies in the United Kingdom might face tariffs when trading with European countries.
In the case that the United Kingdom passes a Brexit agreement, it is still unclear what such an agreement would imply in terms of trade deals.
The uncertainty created by Brexit makes other European countries more preferable for manufacturing giants such as Tesla.
Brexit uncertainty holds back the flow of investment from European Union countries to the United Kingdom.
German Economy
Recent research on Germany’s economic growth showed that Germany is facing an economic slowdown.
Tesla’s decision to open a large plant in Berlin is likely to boost Germany’s economy, and contribute to preventing economic stagnation in the region.
Elon Musk stated that selecting Germany as the location for Tesla’s European plant was a strategic decision to benefit from Germany’s strong engineering industry.