Model Y cars are pictured during the opening ceremony of the new Tesla Gigafactory for electric cars in Gruenheide, Germany, March 22, 2022. [Source: Reuters]

Tesla (TSLA.O) has paused plans to produce entire batteries in Brandenburg, Germany, and will instead carry out some production steps in the United States where tax incentives are more favourable, the Brandenburg economy ministry said.

The U.S. carmaker had originally planned to produce the full battery at the Gruenheide site in Germany, with a peak capacity of over 50 gigawatt hours per year.

But with the United States offering electric vehicle makers sourcing batteries from within the United States tax breaks and consumer discounts, the company has changed course.

Tesla did not respond to requests for comment.

Chief Executive Elon Musk said in March 2022 that the battery plant would reach volume production by the end of 2023, but the plant and car production site have hit their targets later than planned.

In 2020, Musk said the Berlin gigafactory would be the biggest battery factory in the world.

Tesla has struggled to ramp up production of the 4680 battery cell at its factories in Fremont, California, and Austin, Texas, which experts have attributed to new and unproven techniques the company has been having trouble scaling up.

It announced in late January it would invest more than $3.6 billion to expand its Nevada gigafactory complex with two new factories, one to mass produce its long-delayed Semi-electric truck and the other to make its new 4680 battery cell.