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Why Is Tesla Motors Inc (TSLA) Buying This German Engineering Company?

Tesla Motors Inc (NASDAQ:TSLA)

Tesla Motors Inc announced that it has agreed to acquire Grohmann Engineering, an engineering company headquartered in Prüm, Germany. The automated manufacturing company, led by founder and CEO Klaus Grohmann, is regarded as one of the world leaders in highly automated methods of manufacturing. According to Tesla, Grohmann Engineering will be renamed Tesla Grohmann Automation following the close of the deal, which is subject to German regulatory approval. The automaker did not disclose the terms of the deal.

Tesla is buying the Grohmann Engineering as part of its efforts to make its factories “the most advanced in the world.” The automaker said in a statement that “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.”

Tesla Motors Inc (NASDAQ:TSLA)
Photo: Tesla Factory Line

Tesla Plans To Hire Over 1,000 Technicians in Germany

Tesla Motors Inc said that it needs the best engineering talent in automated manufacturing systems in order to meet its goal of producing 500,000 cars per year by 2018.

“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,” the electric car maker added.

Grohmann Engineering is an automated manufacturing company. The automaker said that the deal will bring Grohmann’s leadership, a world-class team and unique expertise in-house. Also, “it will serve as the initial base for Tesla Advanced Automation Germany headquarters, with other locations to follow.”

The car maker will use Grohmann’s expertise to produce several critical elements of its automated manufacturing systems in Germany. The company plans to create more than 1,000 advanced engineering and skilled technician jobs in Germany over the next two years.

Tesla’s Major Issue – Improving Manufacturing Capabilities

Business Insider reported that improving its manufacturing capabilities has been a major issue for the electric car maker throughout this year. The automaker wants to improve its manufacturing expertise as it looks boost the production from about 100,000 vehicles annually to 500,000.

The automaker is also working on its massive battery factory in Nevada. The factory is designed to produce battery cell production, which is expected to begin by the end of this year. Last week, CEO Elon Musk confirmed that his company has created a new glass technology group to develop its own products. He told analysts that the new glass technology group will produce its own glass technology for use in automotive applications, beginning with the upcoming Model 3.

The automaker added that it has increased the production rate at its Fremont Factory by 400% in four years. The firm expects the acquisition of Grohmann Engineering to accelerate that growth rate.

The deal is expected to close in early 2017, subject to approval from regulators, including in Germany.

Financial terms of the deal were also not disclosed.

Shares of Tesla Motors Inc are down more than 19%. The stock has lost 16.85% during the past 12 months.

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