Elon Musk showcases his dance moves while inaugurating the new Tesla factory in Germany.

• The CEO of Tesla will officially open the new Giga Berlin (Gigafactory Berlin) plant in Grünheide by cutting a red ribbon.
• Tesla sees the Berlin factory producing up to 500,000 vehicles annually.
• In recent quarters, Tesla has been shipping cars from China to European customers.

On Tuesday, Elon Musk officially opened the first manufacturing facility in Europe, aiming to alleviate strain on other factories in the U.S. and China.

At Tesla's 5 billion euro ($5.5 billion) plant, Musk danced as he supervised the delivery of the first German-made cars to 30 clients and their families.

"This is a great day for the factory," said Musk, hailing the launch as "another step in the direction of a sustainable future," according to Reuters. The Tesla CEO revived memories of the launch of the firm's Shanghai factory in January 2020, where he also showcased some of his dance moves.

The new Giga Berlin (Gigafactory Berlin-Brandenburg) factory, located in Grünheide, a coal town in Brandenburg, Germany, will be officially opened by Musk.

Giga Berlin is not supported by everyone. On Tuesday, several protesters gathered outside the facility to express their concerns, as reported by Reuters. They are worried that the plant will consume too much water and they are unhappy with the number of trees that were cut down to construct it.

High demand

The Berlin factory of Tesla is expected to produce up to 500,000 vehicles annually, according to a report by Auto Motor Und Sport in Germany.

Tesla aims to produce 1,000 vehicles per week by the six-week mark after starting commercial production, and 5,000 vehicles per week by the end of 2022, according to independent researcher Troy Teslike.

There have been delays for Model Ys and certain Model 3s in various regions due to the U.S. EV manufacturer's inability to meet demand.

Due to the resurgence of Covid-19 cases in China, Tesla temporarily shut production at its Shanghai plant last week, limiting the production of made-in-China Model 3 and Model Y vehicles for at least two days.

In recent quarters, Tesla has been shipping cars from China to European customers.

The demand for electric vehicles (EVs) in Europe is still very high, and now Tesla can produce some of its vehicles on the continent, rather than solely relying on shipping from China.

Giga Berlin, which is crucial to Tesla's global expansion plans, has been in development for several years. The company recently began production of the Model Y at a plant in Austin, Texas, but has not yet held a grand opening for the site.

In November 2019, Musk praised German engineering when he announced plans to establish a car plant in Germany.

German engineering is renowned, and that's why we're placing our Gigafactory Europe in Germany. Additionally, we're establishing an engineering and design center in Berlin, known for its exceptional art.

German authorities gave Tesla conditional approval to start production on March 4.

The conditional license for Tesla's vehicle and battery plants in Brandenburg was anticipated after several months of delays. Despite plans to begin vehicle production by early summer of 2021, the Covid pandemic, supply chain issues, and conflicts with environmentalists impeded progress.

Thirsty factory?

At the facility, water usage remains an issue while the plant is operational.

Deutsche Banke autos sector analysts stated in a research note on Monday that the impact on the local water supply remains a concern for the future of the plant. They emphasized that Tesla must present evidence of responsible water usage and air pollution control in order to increase production volume.

The company may deplete the water reserve in the region with the initial stage of plant construction, and will require additional extraction permits to increase its capacity in the future, according to sources.

Tesla will reportedly have enough supply to meet its initial 500,000 volume target, but may encounter challenges in expanding each of its Gigafactories to produce 1 million units annually.

—Additional reporting by CNBC’s Lora Kolodny.