Dive Brief:

• Tesla will locate its first European Gigafactory in Germany because of concerns over Brexit according to CEO Elon Musk in a report by Auto Express.
• The factory is expected to be operational in late 2021 and will be located in Grünheide, with a design and engineering facility in Berlin. It will build batteries, powertrains and vehicles. Production will start will the Model Y, according to a tweet from Musk.
• "Brexit [uncertainty] made it too risky to put a Gigafactory in the UK," Musk told Auto Express. Tesla did not immediately respond to a request for comment.

Dive Insight:

Musk is not the first auto executive to cite Brexit as an issue. Earlier this year, leaders at Honda and BMW said a no-deal Brexit would make it hard for the companies to remain in the UK.

Around the world, the auto industry relies on cross-border trade for procurement during the manufacturing process and for the final sale. This is especially true in the UK where 80% of the passenger cars built there are exported and 51% of all exported cars are bought by customers in the European Union, according to the European Automobile Manufacturers Association.

The auto industry relies on the process of just-in-time manufacturing that runs lean on inventory. Unexpected changes to cross-border trade could disrupt this process.

"And now all of the sudden we're changing that situation and there is a lot of uncertainty around what is going to happen when they ship components and cars across the border between the EU and Great Britain," David Closs, the McConnell chair emeritus of business administration at Michigan State University's Supply Chain Management Department, told Supply Chain Dive earlier this year.

While the UK is known for high-profile car brands, the vehicle supply chains in Germany are also well oiled with Audi, BMW, Mercedes-Benz, Volkswagen and even Ford manufacturing cars in the country.

"Everyone knows that German engineering is outstanding and that's part of the reason we're locating our Gigafactory Europe in Germany," Musk said at an event earlier this week, according to Tech Crunch.

Locating in the same region as these companies will allow Tesla to take advantage of an automotive supply chain that is rich with resources. BMW has called its supply chain "the heart of the business," according to Automotive News Europe.

But it also means there will be engineering and manufacturing talent to fill the roles at the factory. Tesla has posted job openings for its Gigafactory Berlin, looking for people in operations, manufacturing and engineering.