Gigafactory 3

As global trade tensions continue to rise, the importance of controlling one’s supplies becomes more important, as does finding ways to take risk out of cross-border transactions. For manufacturers, the simplest way to achieve this is to localise production. Tesla is about to do that at ginormous scale through the delivery of its first high volume production facility in Asia. ‘Affordable cars must be made on same continent as customers’, said Elon Musk, talking about his new 10 million sq ft facility outside Shanghai, which is expected to commence production this month. Speed to market is also a consideration; Gigafactory 3 will operate at a stabilised throughput of half a million cars per year. A key rationale for offshoring production has historically been found in labour arbitrage. However, as robotics costs continue to plummet and fall beneath the equivalent cost of labour, the cost advantage is eroded. Consequently, the case for repatriating elements of manufacturing that were offshored in the wave of globalisation starting in the 80s, builds (particularly for highly technical products like cars). A European equivalent of Gigafactory has been mooted for some time now, with rumours that this will find a home in Lower Saxony. Adidas had previously onshored its ‘hyper flexible and localised’ SpeedFactory to Germany for similar reasons. We see here what might be the thin end of a prospective onshoring wedge. #industrial #supplychain