Tesla is building a factory in Shanghai for large-format batteries

Xinhua reported today, Sunday, that Tesla will build a factory in Shanghai to manufacture a large-scale energy storage battery known as the Megapack.

Xinhua reported that Tesla, owned by Elon Musk, will start work on the factory in the third quarter of this year and start production in the second quarter of 2024.

Xinhua said the new factory will complement Tesla’s existing factory in Shanghai, where it makes electric cars, and will initially produce 10,000 megawatts per year, equivalent to about 40 gigawatt-hours of energy storage, to be sold globally.

With the new factory, Tesla will take advantage of China’s dominant battery supply chain to increase production of Megapacks, and lower their costs, in hopes of meeting the growing global demand for energy storage as the world shifts to using more renewable energy.

Tesla generates most of its money from its electric car business, but Mr. Musk has committed to expanding its solar and battery business to roughly the same size as its auto business.

Chinese battery giant CATL is deepening cooperation with customers, including Tesla, in the supply of energy storage batteries. CATL President Robin Zeng expects energy storage batteries to have a larger market than the batteries that power electric vehicles.

Tesla already has a factory for Megapacks in Lathrop, California, where it can make 10,000 units per year.

The company began producing its Model 3 cars in Shanghai in 2019, and is now able to produce 22,000 vehicles there per week.

Tesla struggled with rising inventory in Shanghai as demand began to languish in the third quarter of 2022, prompting deep price cuts in its key markets globally in January.

Electric vehicle sales growth in China, the world’s largest auto market, slowed to nearly 20 percent in the first two months of 2023.