Elon Musk's plan to put a Tesla Gigafactory on every continent could lead the company to even higher growth, the CEO said in an interview last week.
The electric car manufacturer has started expanding from its Silicon Valley roots to produce cars in other countries, starting with Shanghai and moving onto Berlin. During an interview on the Third Row podcast, Musk explained how his goal could help resolve the largest issue facing the firm.
"The biggest problem we have to solve right now is having production on each continent, because it's insane to be making cars in California [and] shipping them to Europe and Asia," Musk said.
As Tesla shifts from being a niche premium automaker to a mass-market manufacturer, it's the sort of shift that could help them meet demand. When the company started producing the Model 3 in July 2017, it had only shipped around 250,000 vehicles in its lifespan.
That's all changed now. With the launch of the Model 3, which is now available at $35,000, the company has now shipped nearly one million cars. The Model Y SUV set to enter production next month and the Cybertruck due next year are both expected to push those figures higher thanks to their similar price points.
But getting all those cars to customers could prove the biggest challenge. Musk noted how each car sitting on the water is finished, which involves high capital carrying costs. There's also the costs of transport, tariffs, and damage costs as cars are loaded and unloaded.
The factory in California has to cater to all these markets, storing stickers in multiple languages and adhering to each country's regulations. That includes switching between right and left and drive, which Musk described as "some random bureaucratic decision 100 years ago...this is a mega pain in the ass!"
Beyond its Fremont factory, Tesla has started building out a series of "Gigafactories" designed to increase its total battery and vehicle output. Giga Nevada started producing more battery capacity than all other automakers combined by August 2018, while Giga New York is dedicated to the company's solar efforts.
Giga Shanghai, which handed over the first cars to consumers in January, is designed to produce Model 3 and Model Y cars for the Chinese market. Musk noted that Chinese car parts are not subject to tariffs depending on how much of the car is made in China. He also stated that the country is "probably" the biggest market for electric cars in the world, and around half of all EVs are made in China.
"I'm not sure if you realize just how much of an uphill battle Tesla has had to sell cars in China," Musk said. "We had basically no access to any of the subsidies and we paid a tariff and we had to ship the cars over and every single thing was set against Tesla."
Why Berlin? Musk joked during the podcast that it "has the best nightclubs." He also noted how the factory will be around 30 minutes outside of Berlin in Brandenburg. BMW was previously investigating the location but pulled out, which meant "a ton of the environmental work and permits had already been done."
While each factory has its own upsides, Musk said that the basic issue of no longer waiting several weeks to ship cars to consumers should greatly simplify the processes.
"It was just fundamental economics," Musk said. "That kind of makes sense, that making cars on the continent where they are bought will be a lot more efficient than making them in California and shoving them around the world."