Tesla Earmarks $5 Billion for Its Second European Gigafactory in Spain

Many people believe Tesla has a demand problem after it slashed prices for its four models in all markets. Still, the American EV maker is busy scouting places for new gigafactories, which contradicts the demand theory. While Giga Mexico is already a work in progress, Tesla is also talking with local authorities in India, South Korea, Indonesia, and Canada to establish new production facilities. The latest on this list is Spain, as local media claims Tesla is in talks with the regional government of Valencia for a new gigafactory.

If history repeats itself, Spain might be more certain than any of the above countries. Although India, South Korea, and Indonesia have courted Tesla for years, things haven't moved past the negotiating table. On the contrary, when the Mexican government announced last year that it would host a Tesla gigafactory, things proved true. Spain is a similar case where local authorities never courted Tesla but are in advanced talks for a gigafactory nevertheless. This shows that Tesla wants this to happen, and most of the time, Tesla gets what it wants.

Although no official statement has been made, Spanish newspaper Cinco Dias reported that Tesla plans a 4.5 billion euros ($4.83 billion) investment for a gigafactory in Valencia. The rumors appear to be confirmed by a spokesman for Valencia's regional government, who told Reuters there were talks with an unidentified company about a "large automobile investment." They didn't offer details, citing the confidentiality of the negotiations, but confirmed that the talks were "very advanced."

Spain makes a lot of sense for a Tesla gigafactory. It is the second-largest car producer in the European Union and has moderate wages, highly skilled workers, and one of the best infrastructures among European countries. Tesla already has a gigafactory in Europe near Berlin, but as the continent intends to phase out combustion-engine cars, the demand for electric vehicles is projected to skyrocket.

Giga Berlin costs are still elevated, considering the high wages in Germany. A production facility in Spain could leverage the country's advantages to build more affordable EVs based on the Gen-3 architecture. These could not be produced at Giga Berlin, although Tesla is expected to introduce a second model in production soon. That could be the Project Highland Model 3, though, as it makes more sense financially for the German gigafactory.

Tesla invested around 5 billion euros ($5.4 billion) to build Giga Berlin, which took three years from groundbreaking to start of production. Tesla thinks it can do better than that and plans to prove it with Giga Mexico. If Spanish environmentalists are not as fierce as those in Germany, Giga Valencia could start making EVs as early as 2025. Tesla plans around 10-12 gigafactories worldwide to reach the goal of selling 20 million EVs per year by 2030.