Tesla Makes Bombshell Acquisition Announcement

Tesla (NASDAQ:TSLA) recently made an announcement that that it plans to buy Grohmann Engineering, a small German engineering firm based in Prüm, Germany. The company specializes in highly automated manufacturing techniques. After the purchase, the company will be renamed Tesla Grohmann Automation.

The Grohmann unit will be part of the new Tesla Advanced Automation Germany group. Tesla said, “We expect to add over 1,000 advanced engineering and skilled technician jobs in Germany over the next two years.” Grohmann currently employs around 700 people, including hardware and software engineers.

Tesla founder and CEO Elon Musk said on a call discussing the news, “This will really be our first acquisition of significance in our whole history.” The deal depends on approval from regulators. Tesla wants to complete the acquisition in early 2017. The financial terms of the deal have not been disclosed.

Tesla says that the acquisition will help automate and accelerate production at its factories. Tesla said, “We have increased the production rate at our Fremont Factory by 400 percent in four years, and we expect this acquisition to accelerate that growth rate.” Tesla wants to expand its vehicle production from less than 100,000 units this year to 500,000 units by 2018 and up to 1 million units annually by 2020. That rate of expansion would be one of the fastest in automotive history if achieved.

Tesla still needs to invest billions more to complete the unfinished Gigafactory. Gigafactory 1, which is located in Sparks, Nevada, is still under construction. Once Gigafactory 1 is fully operational, Tesla plans to build the battery cells that power its vehicles and its energy products there. Tesla estimates the factory will help the company reduce its battery prices by about 30 percent, which will in turn help it manufacture vehicles for less money.

Tesla also plans to establish a combined vehicle and Gigafactory in Europe. By combining battery production with car production, Tesla will likely be able to make its production process even more efficient. The company will begin looking for locations for its second Gigafactory next year.

Tesla is preparing to release its Model 3 electric sedan in late 2017, its first product intended for less wealthy buyers. More than 300,000 people have put down deposits to reserve a Model 3. Tesla is currently in the midst of seeking investor approval for a merger with SolarCity Corp. The company surprised investors with a quarterly profit last month, its second profitable quarter as a public company.

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