Thursday 02/04/2020

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Why Flanders should go ‘all-in’ on Tesla

Senior Executive Advisor

What has changed since then for Flanders to go all-in with regards to attracting production facilities for Tesla?

In April 2016 Tesla launched its new model 3 series which, in comparison to its predecessors, is fairly affordable with its 35.000 € price tag. This has led to an unseen pre-ordering wave of more than 400.000 cars for the new model. Recently a lot of questions have been raised on the capacity of Tesla to increase its production capacity so rapidly. The numbers show that Tesla sells 30% of its cars in Europe where it will sell, based on a conservative estimation, an estimate 200.000 cars in the near future. This is the equivalent of 5 times the production capacity of the Tesla-plant in Tilburg, until now the only production facility on our continent. Based on this, we can assume Tesla will need an additional production capacity of around 150.000 cars in the near future.

Tesla needs to be able to produce an additional 150.000 cars in Europe
Realistic or not, Elon Musk is not exaggerating when he indicates that Tesla rapidly needs to step up its European production capacity. This becomes even more stringent knowing that the current Tesla production plant is located in California which is a remote location for shipping cars to Europe. But what cards does Flanders hold in attracting new production/battery plants for Tesla and why should our government go ‘all-in’ to attract these? Firstly, the current facility in Tilburg in not far away so a new production facility in Flanders can create synergies and cost efficiencies. They could, for example, work with 1 CEO, 1 sales team, 1 quality control department,… Secondly, Flanders has a strong logistics network with the port of Antwerp and cars can be distributed pretty much anywhere in the continent in a 12-hour radius. Thirdly, a plant between Antwerp and Brussels is an interesting place to attract talented multilingual people. Finally, Tesla is breaking new ground and thus needs a regulatory and fiscal climate that is advantageous for their product. The proximity of the EU-institutions and the Belgian fiscal stimulus for electrical cars are aces in the card deck Flanders holds. But will this be enough? Competition is tough, in France minister Ségolène Royal has tried to court Tesla in offering a production site on a former nuclear energy plant while Germany is also actively lobbying to attract production facilities in a market that Tesla is trying to tap into for years.

5.000 jobs in Flanders
Flanders need new momentum with regard to its automotive industry. More than ever it is important to invest in the technologies for tomorrow. After the closure of Renault Vilvoorde, Ford Genk and Opel Antwerpen the more traditional car manufacturing industry is leaving our country. Nonetheless it remains vital to keep attracting such business because it creates local employment for a low and middle schooled jobs which are already under pressure. Looking at car production plants that have a similar capacity (+150.000 yearly) we would estimate for such a plant to generate around 2.500 jobs directly, and 2.500 indirectly on the long run. Of course this is largely dependent on the success of the brand.

Audi Vorst as an example?
Recently Audi Vorst was promised a fiscal stimulus package of around € 130 mio to produce its new electrical model. Maybe our politicians should consider courting Tesla in the same way with an attractive investment environment given the enormous potential that lies ahead? Why not even consider developing a pioneer regulatory framework for self-driving technology as Tesla is already experimenting with? All these elements have one thing in common, Flanders should go all-in for Tesla.

In collaboration with Pierluigi Lonero
Analyst auto-industry Bank Degroof Petercam