Why Tesla is buying a German manufacturing company you've never heard of

Tesla FactoryBenjamin Zhang/Business InsiderA Tesla being assembled.

Tesla announced on Tuesday that it intends to acquire Grohmann Engineering, a German manufacturing company with expertise in automated production.

If Grohmann sounds obscure, that’s because it is. But let’s put that obscurity in context.

Germany is a manufacturing powerhouse. The country is full of companies that are exceptionally good at making stuff.

Making stuff is a practice that’s been getting more automated since the first assembly lines were developed over a century ago. So it makes perfect sense that Tesla would be looking to Germany for this type of innovation. Tesla manufacturing boss is a former Audi executive — a guy who understands the German manufacturing landscape.

But that’s just part of the story.

Tesla is, to be frank, up against it. The automaker will do well to deliver 80,000 vehicles this year. It had earlier guided toward something closer to 90,000. CEO Elon Musk wants to ramp that up to 500,000 in just two years. In between, Tesla will be rolling out its Model 3 mass-market vehicle — and striving to fulfil 375,000 pre-orders for the car.

As automakers go, Tesla lives at opposite ends of a spectrum. To one extreme, Musk and his team have created the first viable new car company in decades. To the other, that car company hasn’t proved to very good at a core function: building cars.

The struggle

Make no mistake, Teslas are fine automobiles — some of the finest, in my experience. But building cars is all about building them at scale, and Tesla is struggling to get there.

To fix this, Musk has decided to restyle manufacturing not as a competency to acquire, but as a problem to be solved. It’s in his nature: he’s not a process guy, he’s a problem-conqueror. Anybody can build cars and lots of of them, but Musk wants to completely change how they’re built.

A company like Grohmann, it seems, provides the critical element to managing that change: automation. Musk’s vision on this front is clear: cars can be manufactured much faster, more efficiently, and cheaply than they are now. Robotics and automation are the keys.

And they have to be because it’s going to be very hard for Tesla to go from 100,000 per year production to half a million in just 24 months.

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