Tesla will build a factory in Shanghai where Megapack batteries will be produced

SHANGHAI (Reuters) – Tesla Inc is opening a plant in Shanghai capable of producing ten thousand Megapack energy products a year, to supplement output at its Megapack factory in California, the company said in a tweet on Sunday.

This information was first reported by the Chinese state website Xinhua.

Elon Musk’s automaker will begin construction of the factory in the third quarter and begin production in the second quarter of 2024, Xinhua reported at a signing ceremony in Shanghai.

Complementing the massive existing electric vehicle factory in Shanghai, the new plant will initially produce 10,000 Megapack units per year, equivalent to about 40 gigawatt hours of energy storage, which will be sold around the world, Xinhua says.

With the new factory in Shanghai, Tesla will take advantage of China’s world-leading battery supply chain to increase production and lower costs of its Megapack lithium-ion batteries to meet growing global demand for energy storage as the world shifts to greater use of renewable energy.

Tesla generates most of its money from its electric car business, but Musk has pledged to grow its solar and battery businesses to about the same size.

Chinese battery giant CATL is also deepening cooperation with customers including Tesla to supply batteries for energy storage, which its CEO Robin Zeng says will be a larger market than batteries that power electric vehicles (EVs).

Tesla currently operates a Megafactory in Lathrop, California, capable of producing 10,000 Megapacks per year.

The company started producing Model 3 cars in Shanghai in 2019 and currently has the capacity to produce 22,000 units per week.

As Reuters reported last May, Tesla planned to expand the Shanghai Gigafactory, its most productive car factory, to increase its annual production capacity of 450,000 units.

But the U.S. company struggled with rising inventories in Shanghai as demand began to weaken in the third quarter, leading to aggressive price cuts in major global markets in January.

Electric vehicle sales growth in China, the world’s largest auto market, fell to 20.8% in the first two months of 2023, compared with 150% in the same period a year ago.

(Reporting by Josh Horwitz, Zhang Yan and Lavanya Ahire; Editing by William Mallard, Toby Chopra and Diane Craft)