The European market demand is strongly recovering, and Tesla's German factory is expanding production against the trend: annual production target increased by about 20%

According to the Zhitong Finance APP, Tesla (TSLA.US) Germany's manufacturing subsidiary has confirmed in its 2025 annual report that the American electric vehicle giant plans to increase the weekly production capacity of its Grünheide factory to 7,500 vehicles in the 2026 fiscal year, equivalent to an annual production of approximately 375,000 vehicles, an increase of about 20%. At the same time, it will expand its battery business and add 3,500 jobs. This expansion plan stands in stark contrast to the wave of layoffs currently sweeping through the German automotive industry, where traditional automotive giants like Volkswagen, Mercedes-Benz, and BMW are closing factories and laying off workers.

From 54% to Full Capacity: Urgent Need to Improve Capacity Utilization

The Grünheide factory is Tesla's only complete vehicle production base in Europe, which began production in March 2022 and currently only produces the Model Y. In 2025, the factory produced a total of 202,000 vehicles, a year-on-year decrease of about 9,000 vehicles, with the capacity utilization rate dropping from 56% to 54%. Tesla attributed the decline in production to model adjustments and the impact of new model integrations.

Despite the drop in production, Tesla's German subsidiary still achieved a net profit of €77.1 million (approximately $88.2 million) in 2025, an increase of about €20 million compared to €56.8 million in 2024. However, revenue fell from €7.7 billion in 2024 to €7.1 billion. This phenomenon of "reducing quantity while increasing profit" indicates that even with a capacity utilization rate of less than 60%, Tesla can still extract more profit from each vehicle.

The expansion plan for 2026 is a direct response to this situation. The company expects production in 2026 to be "significantly higher" than the previous year, with the capacity utilization rate also improving. With a target of 7,500 vehicles per week and an annualized 375,000 vehicles, Tesla is attempting to push the capacity utilization rate of Grünheide from 54% towards near full capacity.

3,500 New Jobs: Hiring Against the Trend of Layoffs in Germany

Accompanying the expansion plan is a large-scale recruitment campaign. Tesla plans to add approximately 3,500 jobs at the Grünheide factory in the short to medium term. The specific composition includes about 1,000 new positions in the complete vehicle production department, about 1,500 in the battery production department, and around 500 temporary workers transitioning to permanent employees.

Currently, the total number of employees at the Grünheide factory is approximately 12,500. In June of this year, Tesla announced that it would increase weekly production by 20% to 7,500 vehicles starting in October and would hire an additional 1,000 new employees for this purpose. Of the first batch of 1,000 recruits announced earlier, about 700 have completed their onboarding.

This scale of recruitment is considered "an anomaly" in the current German automotive industry. According to analysis by personnel service provider Index, the number of job vacancies in the German automotive industry remained low in the first half of 2026, far below the peak in the first half of 2023. Volkswagen Group's CEO threatened to lay off another 50,000 globally; Mercedes-Benz's CEO called for the abandonment of the 35-hour workweek; BMW's new CEO announced a tightening plan upon taking office; and Opel cut 650 research and development positions. Audi's publicly available recruitment website has only posted 101 positions, of which only 5 are permanent jobs How is Tesla expanding against the trend? According to local media reports, Tesla is implementing a 38-hour work week in Grünheide, which is 3 hours more than other car factories in Germany, providing a cost advantage of 7.9% from just this measure. Additionally, Tesla is the only manufacturer that has not signed a collective labor agreement with Germany's largest union, IG Metall. The geographical location of Grünheide, close to the Polish border, also allows Tesla to access Polish workers at a labor cost that is 58% lower.

Battery Ambition: 18GWh Capacity and "Europe's First" Complete Supply Chain

In addition to expanding vehicle production, battery manufacturing is another key focus of this expansion. Tesla plans to increase the annual battery production capacity of the Grünheide factory from the initially planned 8GWh to 18GWh, with an additional investment of $250 million. The 18GWh capacity is sufficient to meet the battery needs of approximately 250,000 to 350,000 vehicles. Battery production is expected to start in the first half of 2027, creating about 1,500 new jobs.

Tesla's goal is to achieve a complete supply chain integration from battery cells to finished vehicles in Grünheide—reportedly a model that is "the first of its kind in Europe." However, the company also admitted in its annual report that battery production in Europe "faces significant challenges" and is closely tied to economic framework conditions such as supply chains. Compared to the markets in China and the United States, the European battery manufacturing industry faces multiple development obstacles.

Demand Recovery: Model Y Returns to the Top of Germany's Electric Vehicle Sales

The confidence in expansion comes from tangible market demand. After a weak 2025, Tesla is experiencing a strong recovery in the European market. In March 2026, the registration of Model Y in Germany quadrupled year-on-year, reaching 9,252 units. In the same month, Tesla's new car registrations in the German market increased by over 315% year-on-year. This momentum continued into the second quarter: Tesla's global delivery volume in the second quarter of 2026 reached 480,100 units, a year-on-year increase of 25%, far exceeding market expectations.

June data was equally impressive. Tesla's new car registrations in France doubled year-on-year (up 105%), while Sweden saw a 56% increase and Denmark a 39% increase. In the first half of this year, Tesla registered nearly 29,000 units in Germany with just the Model Y and Model 3, a year-on-year increase of 225%. The Model Y has returned to the top of Germany's best-selling electric vehicle list.

However, the recovery is not uniform. Data from the UK market in July showed that Tesla's new car sales fell nearly 60% year-on-year to 987 units. Early in July, reports indicated that BMW had temporarily surpassed Tesla in monthly electric vehicle deliveries in Europe by 308 units. The competitive landscape in the European market is still dynamically changing.

Strategic Significance: Multiple Values of Localized Production

From a strategic perspective, the expansion of the Berlin factory is crucial for Tesla. The Grünheide factory currently supplies over 30 markets and will further expand in the future. Local production in Europe helps Tesla reduce its dependence on exports from China and the United States, shielding European deliveries from logistics constraints and potential trade frictions. At the same time, localized production also helps Tesla maintain price competitiveness—thanks to good cost control, Tesla has significantly lowered its starting prices in Germany Tesla also clearly highlighted risks in its annual report. The company stated that the implementation of its expansion plans is still constrained by the macroeconomic environment, with escalating geopolitical conflicts and supply chain disruption risks potentially affecting operational expectations. The "huge challenges" of battery manufacturing in Europe and international competitive pressures are also variables that cannot be ignored.

In addition, Musk stated earlier this year that he hopes the Berlin factory will also produce Cybercab autonomous taxis and Optimus humanoid robots in the future. This means that the long-term positioning of the Grünheide factory may go beyond being merely an automobile manufacturing base