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".
He said the firm planned to set up a design hub in the capital.
He made the announcement speaking to Herbert Diess, chief executive of Volkswagen, onstage at the automotive awards event organised by German newspaper Bild, where he received the "Golden Steering Wheel Award" for the company's Model 3 auto.
Dubbing the plant "Giga Berlin" in reference to the existing Gigafactories in Nevada and New York, Musk detailed on Twitter that it "will build batteries, powertrains and vehicles, starting with Model Y". Musk said Tuesday that the new facility would be "near the new airport", Korosec reports.
The news highlights a further global expansion for the firm, which last month said its factory in China had started production.
Trump receives warm welcome at Alabama football game
The Tigers blew open the game just before halftime with two touchdowns in the span of 20 seconds at the end of the second quarter. And on Saturday, he planned to be at the college football showdown between No. 1 LSU and No. 2 Alabama in Tuscaloosa , Alabama.
Tesla has started hiring for the German project, according to job postings on its website which showed the automaker was looking to fill four roles from engineering to construction.
According to "Manager Magazin", Elon Musk had already confirmed at the presentation of the Tesla figures for the third quarter of 2019 that his company wanted to build a factory in Europe. "Energy costs are far more important than labour costs".
The factory in Germany is expected to go into operation at the end of 2021.
The effort has been a long time coming. I am happy that Elon Musk has chosen Brandenburg as the location.
Musk has until now relied on a single auto assembly plant in Fremont, California, to build a US$63 billion (S$86 billion) company. "Welcome to the metropolitan region, Tesla!"
The Berlin Gigafactory will be the fourth in the company's portfolio, with the most recent being Gigafactory 3 that is located in Shanghai.