When asked about the biggest key to Tesla’s
However, a simple Google
Apparently, it was not high on Tesla’s list either when establishing its presence in Germany. Below, I provide a case study to demonstrate how Tesla’s apparent failure to explore legal nuances of Germany’s investment climate caused labor problems and significant manufacturing delays.
Tesla in Germany
In December of 2022, Tesla’s reputation and bottom line in Germany have taken a significant hit. Harsh working conditions that violate local employment laws have triggered widespread dissent within the facility, toxic press coverage, and significant labor shortages that caused the car manufacturer to fall “way short” of its production goals.
If they were looking at the right data in the due diligence stage, Tesla would not have been surprised by this problem. Conventional review of country data calls for analysts to look at “rule of law” or “political stability” to measure the quality of a host country’s investment climate. A review of this data would have revealed that Germany is a low-risk, high-reward location for inbound investment. That said, selection of data that was tailored to Tesla’s business model would have identified the need to look at the extent to which the host government restricts management’s efforts to control the labor environment.
The following numbers demonstrate that a proper review of specific data points is what should have been performed prior to considering operations in Germany.
Rule of law rankings: 5 out of 139
Political stability rankings: 13 out of 180
Labor force rankings: 14 out of 180
Labor freedom index: 70 out of 180 (this measures the extent to which governments regulate the workplace.)
Consideration of conventional data for measuring government risk would be insufficient. As the data reveals, a search of the extent to which the government controls working environments would have alerted Tesla to the problem.
Tesla in the Future
In many cases, laws lag behind technology because many social, economic, or health effects are not known at the time that a product is ready to enter the market. For this reason, new products and services are put into circulation and the regulations are often implemented and adapted after the fact. However, given the safety risks of autonomous driving, the laws and regulations governing Tesla’s automatic driving will need to be figured out a priori. This means that Tesla’s leadership, in-house counsel, and government relations teams will play a very important role in helping the company maximize its value on a global scale. While attorneys and compliance officers often become more relevant after the product hits the market because law lags behind the technology, Tesla’s in-house team and external legal advisors will play a significant role earlier in the process as it aims to corner the global market on autonomy.