Tesla Buying Germany’s Grohmann Engineering To Automate, Accelerate Production

November 11, 2016

Alan Ohnsman , FORBES STAFF
Covering the intersection of technology, autos and mobility
http://www.forbes.com/sites/alanohnsman/2016/11/08/tesla-buying-germanys-grohmann-engineering-to-automate-accelerate-production/#694382de2d84

In the midst of seeking investor approval for a merger with SolarCity Corp., Tesla made a surprise announcement that it’s acquiring a small German engineering firm to help automate and accelerate production at its factories.

The carmaker led by tech industrialist Elon Musk said in a blog post today that it plans to buy Grohmann Engineering, based in Prüm, Germany, and rename it Tesla Grohmann Automation. The firm, led by founder Klaus Grohmann, specializes in highly automated manufacturing techniques and will help Tesla fulfill Musk’s goal of designing the “machine that builds the machine,” his vision of advanced vehicle production that’s a step change from current conventions.

“Accelerating a sustainable energy future is only possible with high-volume factories. They allow us to manufacture high-quality products with economies of scale, making them more affordable and accessible to the world,” the company said. “As the machine that builds the machine, our factories are so important that we believe they will ultimately deserve an order of magnitude more attention in engineering than what they produce.”

Financial terms of the deal aren’t being disclosed, a company spokeswoman said. Tesla wants to complete the acquisition in early 2017, though the deal requires approval from regulators in Germany and elsewhere.

Tesla needs manufacturing expertise as it races to expand vehicle production from less than 100,000 units built at its Fremont, California, plant this year to a 500,000-unit production pace by 2018. The rate of production is to then double to a 1 million-unit annual pace by 2020, a rate of expansion that would rank among the fastest in automotive history if it’s achieved.

The Grohmann unit will be part of the California company’s new Tesla Advanced Automation Germany group, and serve as its headquarters. Other locations will follow, Tesla said, without elaborating. “We expect to add over 1,000 advanced engineering and skilled technician jobs in Germany over the next two years,” the company said.

Designing and running the most advanced, highly automated factories in the world will not only speed up the pace of production and improve quality, it will lower capital expenditures per vehicle, Tesla said. Along with aiding vehicle production efforts, the addition of Grohmann presumably will aid Tesla’s production of lithium-ion battery packs at its Gigafactory in Nevada and production of solar power products at SolarCity if the merger with that company goes through.

Musk needs all the help he can get as Tesla prepares to expand its auto market presence with the release of the Model 3 electric sedan in late 2017, its first product intended for less wealthy buyers with a base price of about $35,000. Although the company surprised investors with a quarterly profit last month, just its second ever as a public company, Tesla needs to fund its $2.7 billion merger with SolarCity and invest billions more to complete the massive, still unfinished Gigafactory.

The company also continues to channel resources for tooling and production equipment at its Fremont plant in preparation for the Model 3, while also boosting Model S sedan and Model X SUV output.

“We have increased the production rate at our Fremont Factory by 400% in four years, and we expect this acquisition to accelerate that growth rate,” Tesla said. “We are excited to have the Grohmann team join us in our goal of becoming the best manufacturer in the world to help accelerate the world’s progress to a sustainable energy future.”