© Reuters. FILE PHOTO: A Tesla sign is seen at its factory in Shanghai, China, on May 13, 2021. REUTERS/Ali Song
SHANGHAI (Reuters) – China’s state news agency Xinhua reported on Sunday that Tesla will build a factory in Shanghai to produce its Megapack energy storage product.
Elon Musk’s automaker will start work on the factory in the third quarter and start production in the second quarter of 2024, Xinhua reported from a signing ceremony in Shanghai.
Complementing an existing mega-factory in Shanghai that makes electric cars, the new plant will initially produce 10,000 megapacks per year, equivalent to about 40 gigawatt-hours of energy storage, to be sold globally, Xinhua reported.
With the new Shanghai plant, Tesla (NASDAQ:) will leverage China’s world-leading battery supply chain to increase production and lower costs for Megapack lithium-ion battery units to meet growing demand for energy storage globally as the world shifts to using more renewable energy.
Tesla generates most of its money from its electric car business, but Musk has committed to growing its solar and battery businesses to about the same size.
Chinese battery giant CATL is also deepening its cooperation with customers, including Tesla, in the supply of energy storage batteries, which chairman Robin Zeng predicts will have a larger market than the batteries that power electric vehicles (EV).
Tesla currently has a massive factory in Lathrop, California, capable of making 10,000 Megapacks per year.
The company started producing Model 3 cars in Shanghai in 2019 and is now capable of producing 22,000 units of cars per week.
Reuters reported last May that Tesla plans to expand its Shanghai Gigafactory, its most productive automaker, to add annual capacity of 450,000 units.
However, the US company faced an inventory build-up in Shanghai as demand began to languish in the third quarter, 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 20.8% in the first two months of 2023, from 150% in the same period a year earlier.