When Tesla chief executive officer Elon Musk was last year asked whether the factory the company was constructing in Germany would deplete the area’s water supply, he broke out in bellowing laughter and called the notion “completely wrong.”
Six months later, water is one of the primary reasons the plant is still not producing vehicles.
While Musk in August last year pointed to water “everywhere” around Berlin, the region is experiencing falling groundwater levels and prolonged droughts due to climate change. That has sparked a legal challenge that is next week to go to court and an acknowledgment from local authorities that supply would be insufficient once Tesla ramps up the plant.
The issue has the potential to further delay or even stop the 5 billion euros (US$5.67 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 Technical University of Berlin’s hydrogeology department. “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 automaker needs a manufacturing base in Europe to supply the region’s fast-growing electric vehicle (EV) market, which is expected to remain much bigger and more competitive than the US for years to come.
While Tesla has erected the plant at breakneck speed, it is still waiting for final approval from local authorities just as Volkswagen, Mercedes-Benz and Stellantis broaden their own electric vehicle lineups.
“The current water supply is sufficient for the first stage of the factory,” Brandenburg Minister for Economic Affairs, Labor and Energy Joerg Steinbach said in an interview.
Once Tesla expands the site, “we’ll need more,” he said.
Musk has been on a charm offensive to promote the plant Tesla has said would eventually produce batteries and as many as 500,000 vehicles annually.
He has written in German on Twitter, rubbed shoulders with local politicians and threw an Oktoberfest-style county fair at the construction site in October last year.
However, 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 this week said that it is 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 has been constructing near Berlin and Austin, Texas, up and running.
When Credit Suisse analysts raised their Tesla share price target to US$1,025 from US$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 a Jan. 18 report.
Ramping it up should bolster supply in a market that has been “ground zero for the global EV inflection,” they said.
Tesla stock has fallen 22.26 percent this year.
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 COVID-19 pandemic, red tape and a backlash from locals over water usage delaying the start of production by several months.
The Nabu and Gruene Liga groups sued Brandenburg’s environment office last year, saying it failed to take into account the effect of climate change when approving a 30-year permit to pump more groundwater for Tesla’s factory.
Authorities have said the issue is manageable and that they are already looking for additional supply.
A decision in favor of the environmentalists would likely delay the plant’s opening and could derail it altogether. A first court hearing is scheduled for Friday next week.
Tesla and the Brandenburg Ministry of Agriculture, Environment and Climate Protection, which is in charge of the office, did not respond to requests for comment.
Experts have said that some of the environmentalists’ concerns are valid.
Brandenburg’s water table has been dropping for the past three decades. Droughts in each of the past four years have resulted in wildfires and crop failures. Meteorologists are predicting more frequent heat waves, further weakening the ability of soil to store rainfall.
Tesla’s factory would roughly double the amount of water consumed in the Gruenheide area, said Axel Bronstert, professor of hydrology at the University of Potsdam.
It is “naive” to think reserves would suffice for the factory and residents, he said, adding that the groundwater situation in Brandenburg is “serious.”
Regardless of how judges rule in the case, the local water works would have to invest in new infrastructure, including a wastewater treatment plant to ensure adequate supply — major engineering projects that authorities have said could take years.
In its impact report last year, Tesla flagged that water is becoming increasingly scarce due to climate change.
The company said it withdraws less water per vehicle produced than the majority of established automakers, and that it is taking steps at the German plant to further reduce usage.
As per a contract with local authorities, the Gruenheide site would get 1.4 million cubic meters of water annually — enough for a city of about 40,000 people.
Steinbach said that while he is taking the environmental concerns very seriously, the large majority of the local population is in favor of the factory.
Brandenburg authorities are backing efforts to drill for more water in the area, and supply could also be sourced from further away if necessary, he said.
However, digging new wells probably would not make the concerns disappear.
Tesla is getting preferential treatment from local politicians even though it would make an already serious environmental issue worse, said Manuela Hoyer, who lives just a few kilometers from the factory.
“We’ve been told for years that we shouldn’t water our lawns,” said Hoyer, who is active in a citizen’s initiative monitoring the project. “Then the world’s richest man comes along and gets everything he wants.”
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