Tesla Inc is to forgo 1.14 billion euros (US$1.3 billion) of state aid for a factory that it is building in Germany because it has first decided to try to produce a new type of battery cell at scale in Texas, a person familiar with the matter said.
The US automaker has been working on so-called “4680” battery cells at a site near its auto plant in Fremont, California.
Tesla CEO Elon Musk last year said that after the firm proved it could make them on a pilot assembly line in Texas, it would manufacture them at scale at the factory that it has been constructing outside Berlin.
This made Tesla eligible to receive public funds from Germany as part of the EU’s Important Project of Common European Interest initiative, which backs first industrial deployments of battery projects in member states.
As Tesla has shifted gears and is further along producing 4680 cells at its factory under construction in Austin, Texas, it is no longer eligible for the money, the person said on condition of anonymity.
Tesla informed German authorities that it would not use the support package, German Ministry of Economics and Technology spokeswoman Beate Baron said earlier on Friday, without specifying a reason for the decision.
“It has always been Tesla’s view that all subsidies should be eliminated, but that must include the massive subsidies for oil & gas,” Musk wrote on Twitter after the ministry’s announcement. “For some reason, governments don’t want to do that...”
Musk, who also runs rocket maker Space Exploration Technologies Corp (SpaceX), has bristled for years at detractors faulting him for taking advantage of government support. Examples of this include the US loan that helped Tesla get the Model S sedan into production, which the company paid back early.
After his initial Twitter post, Musk revisited a three-and-a-half-year-old exchange with another user who criticized Tesla and SpaceX’s use of subsidies.
“Combined Tesla+SpaceX market cap is now over US$1.2T [trillion],” wrote Musk, who then took issue again with a figure mentioned in a May 2018 Twitter thread.
Tesla shares on Friday fell 3.1 percent in New York trading.
Tesla has almost completed construction of an electric vehicle factory in the town of Gruenheide, southeast of the German capital, and also plans to manufacture battery cells at the site.
While Musk wants to start assembling Tesla Model Ys in Gruenheide before the end of the year, local authorities still have not granted final approval for the project.
The German ministry has estimated that Tesla is investing about 5 billion euros in Gruenheide.
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