Elon Musk says Tesla will build cars in Berlin

Less than three weeks after starting trial production of cars in China, Tesla has announced the location of its second factory outside the United States: Berlin.

In a tweetlate Tuesday, Tesla CEO Elon Musk said the plant would build batteries, powertrains and vehicles, “starting with the Model Y.” The factory is also expected to produce the Model 3, the company’s best-selling car.

Tesla (TSLA) has already posted jobs for construction, operations, engineering and manufacturing workers for the factory in the German capital. The US carmaker did not say when its factory would open, or how many cars would be produced there. Tesla (TSLA) declined to provide additional details.

The move takes the great electric car race to Germany, the manufacturing heart of Europe and the home of Volkswagen (VLKAF), Daimler (DDAIF) and BMW (BMWYY).

Volkswagenhas made the most aggressive move of the traditional auto companies into electric vehicles, announcing plans to invest €30 billion ($33 billion) to electrify its entire product lineup over the next four years.

The world’s largest carmaker has just started making its new ID.3 electric vehicle series and recently announced a deal with Sweden’s Northvolt to build a giant battery factory in Germany. One of the group’s luxury brands, Audi, is already building electric SUVs that are designed to appeal to potential Tesla buyers.

Musk came face-to-face with his main German rival on Tuesday, when he appeared onstage with Volkswagen CEO Herbert Diess at an awards ceremony in Berlin.

Diess praised the billionaire entrepreneur for showing that electric cars are capable of competing with vehicles powered by fossil fuels. But he also eluded to the looming competition between the carmakers.

“I’m happy that Elon is pulling us, but I think the German industry is really now strongly investing — and we will keep you alert,” Diess told Musk.

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The big question is whether Tesla can hold onto its lead in electric-car manufacturing once Volkswagen and other established carmakers really get into the game. The old guard have several advantages: they possess huge expertise in manufacturing and deep pockets that can fund new technology.

In 2018, Volkswagen delivered a record 10.8 million cars. The company has 665,000 employees and annual revenue of $265 billion. On Wednesday, Volkswagen broke ground on an expansion of its plant in Chattanooga, Tennessee, that will allow electric cars and battery packs to be produced starting in 2022.

Hosting Tesla

Peter Altmaier, Germany’s economics minister, touted the new Tesla factory as a vote of confidence in his country.

“The decision by Tesla to build a highly modern factory for electric cars in Germany is further proof of the attractiveness of Germany as an automotive manufacturing base,” he said in a statement.

Hosting Tesla is a major prize. In an interview with a trade publication, Musk said that the United Kingdom, another major European base for global carmakers including Nissan (NSANF), had lost out because of Brexit.

“Brexit [uncertainty] made it too risky to put a Gigafactory in the UK,” Musk told Auto Express.