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Tesla Germany Gigafactory Site Aerial Shot Sean Gallup Getty Images 5e66693c65119

Tesla’s Fast-Track German Plant Charts Path Through Red Tape

March 9, 2020
Tesla's timetable for its German factory calls for it to be constructed within two years.

Elon Musk’s plan to turn a remote wooded lot in Germany into the home of a state-of-the-art car factory in less than two years sent an unequivocal message to local authorities: make it happen or lose it.

Eager to host Tesla Inc.’s first European plant near Berlin -- a potential 4 billion-euro ($4.5 billion) development -- German officials assured the electric-car maker’s chief executive officer fast-track navigation through the country’s notorious bureaucracy. In recent years, onerous regulations have held up projects from a large train station in Stuttgart to Berlin’s first new airport since the end of the Cold War.

Administrative red tape can drag out the process of securing building permission to as long as four years. Even a permit for something as simple as a mobile-phone mast can take two years. Handling complex bureaucracy costs a typical small- or medium-sized hotel business about 2.5% of annual sales and can threaten their survival, according to the DIHK industry group.

That makes Tesla’s ambitious deadline a critical test case of Germany’s ability to adapt just as the powerhouse economy sputters. And even the California carmaker’s German rivals are cheering it on.

“Bureaucratic hurdles shouldn’t decide the race between Tesla and Volkswagen, but the question who builds better cars,” Herbert Diess, chief executive officer of the German auto giant, said in a post on LinkedIn. “That kind of healthy competition makes Germany better and more innovative.”

When complete, the factory will employ up to 12,000 people and churn out as many as 500,000 vehicles annually. Tesla is moving into Germany’s heartland to vie with VW, BMW AG and Daimler AG’s Mercedes-Benz as the country targets a massive increase in electric-car sales.

Tesla got a taste of the risks when a court last month stopped work to clear the site in Gruenheide, a rural community east of Berlin. The hiccup, though short-lived, sent shock waves through the capital, where Tesla’s factory has boosted confidence in Germany’s ability to attract international investment.

The near miss, which could have delayed the factory by months, prompted Economy Minister Peter Altmaier to pledge legislation to reduce red tape, and on Friday, he proposed setting up mobile planning task forces to expedite key projects. Important investments like Tesla’s “only have a chance if we make decisions on time,” Altmaier said.

Amid mapping out strategy to combat fallout from the coronavirus, Germany’s ruling coalition found time during a seven-hour meeting on Sunday night for reducing red tape. Chancellor Angela Merkel’s government agreed to introduce new legislation by this summer to accelerate planning procedures to encourage investment.

High Stakes

German business is watching Tesla’s project closely, hoping the high profile will help remove hurdles holding up hundreds of projects, from 5G wireless equipment to rail tracks and upgrades to the aging power grid.

“Germany just can’t and won’t let this project snag on bureaucracy and litigation,” said Hubertus Bardt, managing director of the IW Cologne economic institute. “Too much investment reputation is staked on it.”

Work resumed in late February on clearing pine trees on the 740-acre plot in the state of Brandenburg. Tesla is under pressure to finish the process before birds start nesting later this month. Missing the deadline could delay construction until the fall.

The carmaker wants the plant to be ready by mid-2021, when electric-car demand is likely to be bolstered by tighter emissions regulations taking full effect. Meeting the deadline requires quick approval for a highway connection and power-grid access.

In a sign of how Tesla’s project is spurring change, Brandenburg is leaning on the investment to push the federal government to change energy regulations, according to the state’s Ministry of Economy, Work and Energy. The former communist state -- desperate to secure attractive jobs -- wants to help local businesses access Brandenburg’s affordable wind and solar power, which currently feeds the national grid.

“Tesla should be able to use local green power,” the ministry said in a note to Bloomberg News.

To ease local concerns about the environment, the manufacturer set aside a number of trees on the plot that house bats’ winter quarters. The company has also volunteered to plant more trees than get cut down.

If the next steps get cleared -- including a public hearing on March 18 -- Tesla would be on track to officially break ground this month, a ceremony that Musk has said he’ll attend.

For Germany, the project could unlock a path for other stalled developments, with project planners bogged down by hundreds of lawsuits, often tied to Germany’s wildlife and environmental protection regulations. Onshore wind park construction has ground to a halt, citizen groups in Bavaria are thwarting rail links with Austria and locals are blocking construction of about 1,000 mobile-phone masts.

“If Tesla and government agencies get the project done on time, companies and infrastructure planners everywhere can take this as proof that projects can be implemented,” said IW Cologne’s Bardt.

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Licensed content from Bloomberg, copyright 2016.

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