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Tesla buys German manufacturing plant to speed up production

This is only Tesla's third acquisition ever, and its second this year, after SolarCity

Financial trends and news by Steven Loeb
November 8, 2016 | Comments
Short URL: http://vator.tv/n/481b

Tesla is a bit of a rarity for a company of its size. While other big tech companies like Yahoo and Google have, at times, made upwards of 20 purchases a year, Tesla really doesn't make many acquisitions at all. Prior to this year, in fact, it had only made one acquisition. This year is a total outlier, it has now made two in just the last three months.

The company announced on Tuesday that it has acquired Grohmann Engineering, a German engineering firm that specializes in automated manufacturing processes. No financial terms of the deal were disclosed.

The purchase will give Elon Musk's company a new factory that will allow Tesla to increase its productivity, aiding its goal of bringing number of cars manufactured to half a million a year by 2018.

"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 wrote.

"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. At very high production volumes, the factory becomes more of a product than the product itself."

Going forward, Grohmann Engineering will be renamed as Tesla Grohmann Automation, and it will serve as the initial base for Tesla Advanced Automation Germany headquarters, with other locations to follow. The company will continue to be led by founder and CEO Klaus Grohmann. 

Tesla said that it expects to add over 1,000 advanced engineering and skilled technician jobs in Germany over the next two years.

The deal isn't quite done yet, as it still needs to be cleared by regulators, including in Germany, but the company is seeking to have the acquisition completed in only a few months, by early 2017.

Tesla is riding high right now. In its most recent earnings, the company posted its second profitable quarter ever, earning $2.3 billion, beating expectations of $1.98 billion. The company also revealed that it delivered approximately 24,500 vehicles in the quarter, up 70 percent quarter-to-quarter, while production rose 37 percent to 25,185 vehicles, both record numbers.

Over a quarter, 25.1 percent of the company, was acquired from private equity firm Deutsche Beteiligungs AG. 

With its technology leadership, Grohmann exemplifies the hidden champions in Germany’s Mittelstand, without which key innovations would not occur,” Torsten Grede, Spokesman of the Board of Management of Deutsche Beteiligungs AG, said in a statement. “Grohmann is an outstanding example of the excellent progress technology-geared Mittelstand companies can make backed by growth capital and the support of professional investors.”

According to Deutsche Beteiligungs, Grohmann revenues have been growing by an average of more than six percent annually over the last 20 years, reaching 123 million euros in 2015. The number of employees tripled over the same period to approximately 700. 

This is Tesla's second proposed acquisition of the year, announcing this summer that it would combine with SolarCity, a solar energy company, which Musk also helped start, and which he serves as chairman.

Prior to this year, Tesla had made one other purchase, buying Riviera Tool, a producer of tools and dies that stamp out metal parts, in early 2015. That allowed the company to expand operations to Michigan, the location of one of its three egineering facilities; the others are in Fremont, California, and now Germany. 

Shares of Tesla stock are up 1.87 percent, trading at $196.83 a share.

(Image source: abcnews.go.com)

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