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Tesla Buys German Engineering Firm In Its Pursuit To Boost Output

In its bid to dramatically increase vehicle production, Tesla Motors Inc (NASDAQ:TSLA) said on Tuesday that it had signed a deal to buy German company Grohmann Engineering, which makes automated manufacturing systems.

Tesla was non-specific on the terms of the acquisition, while one of the current minority shareholders of the German company, Deutsche Beteiligungs AG, announced the stake sale details of the deal, adding that the parties had agreed not to disclose the purchase price. Tesla will buy the 74.9 percent interest held by Grohmann Engineering’s founder and majority owner Klaus Grohmann and the 25.1 percent currently owned by Deutsche Beteiligungs.

Tesla would be using the German company’s know-how to increase vehicle production to 500,000 cars annually by 2018, the U.S. group said, adding that the acquisition is pending regulatory approvals, including in Germany. Tesla hopes to close the deal early next year.

To put Tesla’s vehicle output target into perspective, this year the company reported 14,820 vehicle deliveries in the first quarter, and said it expected full-year 2016 deliveries at 80,000 to 90,000 new vehicles. In the third-quarter results release, the company kept its guidance for 50,000 new vehicle deliveries for the second half of 2016, with a Q4 plan of just over 25,000 deliveries.

Related: The Toilet Paper Crisis: Angola’s Oil Firm Can’t Supply The Basics

For the third quarter, Tesla reported its second-ever quarterly profit and a 92-percent annual increase in the number of cars it manufactured over July to September, to 25,185. Still, some observers and analysts reckon that the company is facing an uphill road ahead with convincing consumers that the Model 3 is a car worth buying.

So, the acquisition of the German maker of automated manufacturing systems is seen as part of Tesla’s ambitious plan to boost production.

“To date, 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 said in today’s acquisition announcement.

By Tsvetana Paraskova for Oilprice.com

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