The European plant will be Tesla's fourth battery plant.
Tesla is too small to make a serious dent in the sales of large automakers like Toyota, but a smaller, luxury competitor could have reason to worry, according to a Bloomberg survey of 5,000 Tesla Model 3 sedan owners.
We don't know precisely where in Berlin Tesla's upcoming Gigafactory will find itself in 2021, but company CEO Elon Musk said it could be built near the "new Berlin airport" - quite the scenic area, though we doubt Tesla chose the location based on aesthetics alone.
He said that the plan is for the factory to be built near Berlin's new airport, which is located just outside the city limits in neighbouring Brandenburg state and due to open next year after years of delays.
Musk has previously suggested setting up a Tesla base in Britain. He also said that Tesla would set up an engineering and design centre in Berlin.
Currently, all of the company's vehicles are built at its factory in California, using batteries produced in Nevada.
Asked on stage why he thought Germany is so far behind in e-mobility, Musk replied: "I don't think German is that far behind, I think it's always hard when there's a lot of momentum around an old technology, there's a lot of infrastructure, and a lot of capital that's tied up in an old technology".
Berlin also has earmarked financial support for manufacturing electric auto battery cells.
Establishing a European production base is a smart move for Tesla, since United States president Donald Trump continues to threaten European carmakers with tariffs, and Brussels would likely react with counter-tariffs on US-made cars.
A huge Tesla plant in the country's capital region is going to up the pressure on Germany's carmakers, who have been sluggish to really get started with electronic-vehicle production. "The UK is lagging behind other European countries in EV take up", he said.
German automaker Volkswagen, which last week began mass production of its ID.3 electric auto, welcomed rival Tesla's decision to build the factory on its home turf.
Earlier this month, Tesla surprised the stock market by posting a profit of $143m for its third quarter, a light moment after it lost over $1bn in the first half of the year amid struggles to control costs around its production lines.