Tesla planning to build affordable $27,000 EV at Giga Berlin

The sub-$27K EV comes as Tesla hikes wages at Giga Berlin as unionization efforts build

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Tesla (TSLA) stock finished slightly lower Monday as the electric vehicle maker revealed Giga Berlin may build its long-awaited cheap EV, while Tesla workers in Germany may be getting a raise as union pressures rise.

As first reported by Reuters, Tesla is planning to build its 25,000 euro ($26,838) mainstream EV on its upcoming Gen 3 platform at Giga Berlin. CEO Elon Musk revealed those plans when he visited the Giga Berlin plant on Friday, following a trip to the UK for an AI summit.

The Reuters source declined to say when production would begin, however, and other sources said Tesla was close to developing a fabrication technology that would allow it to die cast (or mold) nearly the entire underbody of the car in one piece, which would speed up production and lower costs.

Musk has said in the past that production breakthroughs and rethinking how a plant is laid out would allow Tesla to make EVs more cheaply. Most recently he warned that high interest rates are making EVs unaffordable and that is a main impediment to the company’s growth (as opposed to demand).

“I’m worried about the high interest rate environment we’re in,” Musk said during Tesla’s recent earnings conference call, adding, “I just can’t emphasize enough how important cost is … We have to make our products more affordable so people can buy [them].”

Investors have been waiting to hear more on Tesla’s cheaper upcoming Gen 3 platform and models based on it following the company’s investor day back in March, where it declined to reveal more details.

The 25,000-euro car almost didn't happen, according to Walter Isaacson’s new biography on Elon Musk. Musk was more interested in building a cheap “robotaxi,” or car without pedals or a steering wheel that would drive autonomously, than a cheaper EV, according to Isaacson.

Musk’s chief lieutenants, including chief design officer Franz von Holzhausen, reportedly convinced Musk that a cheap, inexpensive global EV was needed to meet Tesla’s 50% compound annual growth rate and that the company could build both the cheap EV and the robotaxi on the same platform, thus cutting costs. Musk apparently signed off on the compromise upon seeing design reviews of both vehicles, which feature Cybertruck-like cues, Isaacson wrote.

Union pressure at Giga Berlin

20 March 2023, Brandenburg, Grünheide: Employees of the Tesla Gigafactory Berlin Brandenburg work on the final inspection of the finished Model Y electric vehicles. The Tesla plant was opened and put into operation on March 22, 2022. In the meantime, about 10,000 people are employed there. Photo: Patrick Pleul/dpa (Photo by Patrick Pleul/picture alliance via Getty Images)
Employees of the Tesla Gigafactory Berlin Brandenburg work on the final inspection of the finished Model Y electric vehicles on March 29, 2023, in Brandenburg, Grünheide. (Patrick Pleul/picture alliance via Getty Images) (picture alliance via Getty Images)

Sticking with Tesla’s Berlin factory, workers at the plant apparently received a wage hike following strong union pressure.

Tesla executives disclosed a 4% wage increase for workers at Giga Berlin during Musk’s visit to the factory, the Wall Street Journal reported on Sunday.

Germany’s powerful IG Metall union, which represents auto workers in the country, has tried to organize the workers at Giga Berlin and force Tesla to agree to a union contract. So far Tesla has not agreed to accepting a union contract. Tesla is the only major carmaker in Europe without union representation on the factory floor, according to the Journal.

The news in Germany follows successes by the United Auto Workers (UAW) in the US and comments by UAW president Shawn Fain that Tesla is the union’s next target.

At least in Germany, Tesla said its wage hikes were not tied to union organizing efforts. “Claims that there is a connection between Tesla’s salary adjustments and union activities are untrue,” Tesla said.

“If you compare annual wages there is a big gap between Tesla and our union workers at Porsche, BMW, Audi, VW, Daimler, and Ford,” IG Metall regional director Dirk Schulze said.

Tesla EU press office and IG Metall did not immediately respond when asked for further comment on wage hikes at Giga Berlin.

Correction: A previous version of this article incorrectly cited the author of a new biography of Elon Musk. We regret the error.

Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.

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