POTSDAM, Germany, March 4 (Reuters) – Tesla Inc (TSLA.O) on Friday received conditional approval for its German gigafactory near Berlin, the state of Brandenburg said, ending the month-long delay for the €5 billion (5, 5 billion US dollars). ) Landmark facility.

The Gigafactory, which is central to Tesla CEO Elon Musk’s ambitions to defeat European leader Volkswagen (VOWG_p.DE), was originally slated to open last summer.

Germany’s largest automaker has the upper hand in Europe, with a 25% share of electric vehicle (EV) sales versus Tesla’s 13%.

Brandenburg’s Prime Minister Dietmar Woidke said in a press conference that the development is “a big step into the future,” adding that the Tesla plant will be an important industrial and technological driver for Germany and the region.

Around 2,600 of the plant’s expected 12,000 workers have been hired so far, unions said last month, and Tesla is in talks with numerous parts suppliers in the region to source as much locally as possible, reducing wait times and costs.

Underscoring the intense competition Tesla faces, Volkswagen said on Friday it would spend about €2 billion on a new factory near its Wolfsburg headquarters to build the Trinity, the first of a new generation of electric vehicles for the German automaker, construction of which is scheduled to begin next year.

Friday’s 536-page conditional building permit for Tesla doesn’t mean the US-based EV pioneer can start production immediately. It must first prove that it meets numerous requirements, including water use and air pollution control.

Only then will Tesla receive the long-awaited operating license and actually start rolling out the 500,000 battery-powered vehicles that the new plant in the small community of Grünheide wants to produce annually.

Another hurdle to securing the site’s water supply emerged late Friday when a Frankfurt Oder administrative court sided with environmental groups that had challenged a concession given to a local water utility to supply the Tesla site. Continue reading

However, the court said the procedural flaws in the permitting decision could be corrected by the water utility, leaving the door open to saving the water supply.

Boosting production in Germany would mean Tesla can deliver its Model Y cars to European customers faster and cheaper, having filled orders in Europe from its Shanghai plant in recent months while awaiting approval for the site was waiting.

Tesla wants to prove within the next two weeks that it meets the requirements, said Brandenburg’s Environment Minister Axel Vogel, while objections can be filed over the next month.

Tesla’s next challenge will be to ramp up production as quickly as possible, which Musk said at a local trade show in October would take longer than building the factory.

Local environmental groups have long feared the plant will negatively impact local habitat. Numerous public consultations, mostly focused on this aspect, delayed the process, with Musk repeatedly voicing his irritation at the German bureaucracy.

The factory, which Tesla has begun construction under pre-approval, will also include a battery factory capable of generating more than 50 gigawatt hours (GWh) per year, outperforming European competitors.

Batteries for cars that are produced locally will initially come from China, Musk said, but he wants to reach series production at the German battery plant by the end of next year.

($1 = 0.9163 euros)

Reporting by Nadine Schimroszik, Christoph Steitz, Jan Schwartz, Victoria Waldersee and Ludwig Burger; Edited by Kirsti Knolle, Miranda Murray, Louise Heavens and Alexander Smith

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