I’ve been reporting Tesla’s German battery promises since 2020. Every year brings a new announcement. Every year, the cells don’t materialize. Today’s €1 billion battery investment news comes with the same hedged language we’ve heard before, and it drops on the exact day the European Union formally abandoned its 2035 EV mandate. The timing tells you everything.

What: Tesla plans to produce up to 8 GWh of battery cells annually at Grünheide starting in 2027
Investment: Total of nearly €1 billion ($1.2 billion) in the cell factory
Capacity: Enough to supply approximately 130,000 EVs per year
The catch: Tesla itself admits “it is currently hardly possible to produce cells economically in Europe”

According to Bloomberg, citing German press agency DPA, Tesla is “creating the conditions” to produce battery cells at its sole European factory. The company currently builds vehicle components in Germany but imports finished cells from the United States.

“The aim is to increase the vertical range of manufacture at the site: everything from battery cells to vehicles will be produced at a single location,” Tesla said in a statement to Reuters. “This is unique in Europe and also strengthens the resilience of our supply chains.”

The Promise Tesla Keeps Making

This is not Tesla’s first German battery announcement. The company promised battery production at Grünheide when the factory opened in 2022. In 2021, Brandenburg’s Economy Minister Jörg Steinbach described Tesla’s planned cells as a “completely new technology” that would “outshine all previous car batteries.”

By late 2022, Tesla had moved most battery equipment to Texas to capitalize on Inflation Reduction Act incentives. The company even withdrew its €1.14 billion subsidy application from the EU in 2021, signaling reduced commitment to European cell production.

Now, three years later, we’re hearing the same promise with an even more distant timeline: 2027.

Tesla’s statement contains revealing language: “If the conditions are right, the entire battery value chain will also take place in Grünheide in the future.” That’s not a commitment. That’s a hedge.

The Same-Day EU Policy Retreat

Tesla’s announcement arrived hours before the European Commission formally abandoned its 2035 combustion engine ban. The EU is now targeting a 90% emissions reduction instead of 100%, allowing plug-in hybrids and potentially some combustion vehicles to remain on sale indefinitely.

As we reported yesterday, this represents the bloc’s biggest retreat from its green policies in recent years. The policy shift came after intense lobbying from Stellantis, Mercedes-Benz, BMW, and Volkswagen, all facing potential billion-dollar fines for missing emissions targets.

The timing matters for Tesla. A strict 2035 EV mandate would have pressured automakers to localize battery production for supply chain security and regulatory compliance. With the mandate weakened, that urgency evaporates. European automakers can now delay their electrification investments, and Tesla faces less competitive pressure to bring battery production onshore.

The Numbers Don’t Add Up

Let’s examine the capacity claims. Tesla says 8 GWh of annual cell production could supply up to 130,000 EVs. That math implies roughly 61 kWh per vehicle, consistent with Model Y battery sizes.

But Grünheide’s stated production target is 500,000 vehicles annually. At 8 GWh, Tesla would produce enough cells for barely 26% of its European vehicle output. The rest would still come from suppliers or US imports.

For comparison, CATL’s Hungarian plant announced in 2022 targets 100 GWh of capacity. BYD is building European cell factories with similar scale. Tesla’s 8 GWh isn’t market leadership. It’s a pilot program.

Tesla’s European Crisis Continues

This announcement comes as Tesla faces its worst European sales collapse in history. We’ve documented the crisis extensively:

October 2025 European registrations plunged 48.5% while the broader EV market grew 26%
Germany sales crashed 60% in June 2025
Sweden collapsed 89%, Denmark fell 86% in October
BYD now outsells Tesla in Europe, with the Seal U surging 833% year-over-year

Tesla’s defensive moves have included launching a stripped-down Model 3 Standard at €37,970 and extending FSD demo programs to pressure European regulators. None of these tactics have reversed the sales decline.

The brand damage from CEO Elon Musk’s political activities, including his endorsement of Germany’s far-right AfD party, has proven particularly stubborn. More than 70% of Brits and Germans held an unfavorable view of Musk in January 2025 polling.

EVXL’s Take

Let me be direct: this announcement is brand repair, not industrial strategy.

Tesla explicitly admits in its own statement that European cell production isn’t economically viable: “In international competition with China and the USA, it is currently hardly possible to produce cells economically in Europe.” Companies don’t typically announce major investments while simultaneously explaining why those investments don’t make financial sense.

The timing is too convenient to ignore. On the day the EU formally retreats from its EV mandate, Tesla counters with a European commitment story. When sales are collapsing and brand perception is toxic, what better narrative than “we’re investing €1 billion in German manufacturing”?

Here’s what I expect: Tesla will continue making incremental progress on Grünheide battery components through 2026, then announce another delay when 2027 arrives. The conditions for economical European production won’t materialize because they’re structural: Chinese manufacturers have genuine cost advantages, European energy prices remain elevated, and Tesla’s 4680 cell technology still hasn’t achieved the scale economics Musk promised at Battery Day in 2020.

For prospective European Tesla buyers, this announcement changes nothing practical. Vehicles will continue using cells from CATL, LG, or US-produced 4680s. The Model Y you configure today will not contain German-made cells.

For current owners, this is background noise. Your vehicle’s value, charging experience, and software capabilities remain unchanged.

What this story actually reveals is Tesla’s desperation to generate positive European headlines amid a catastrophic sales collapse. The substance is thin. The hedge words are thick. And we’ve seen this movie before.

Are you still considering a Tesla in Europe despite the brand challenges? Or have you switched to BYD, Hyundai, or another competitor? Share your thinking in the comments.