Tesla to build a Megapack battery factory in Shanghai

TSLA Inc (TSLA.O) has announced plans to build a factory in Shanghai capable of producing ten thousand Megapack energy products per year, as a supplement to the Megapack facility in California, the company said in a tweet on Sunday.

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Chinese state-run media outlet Xinhua broke the news of the incident first.

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Xinhua reported from a signing ceremony held in Shanghai on Tuesday that Elon Musk's automaker would break ground on the plant in the third quarter and begin production in the second quarter of 2024.

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As a complement to a gigantic electric vehicle manufacturing facility located in Shanghai, the new factory will initially produce 10,000 Megapack units a year. This is equivalent to around 40-gigawatt hours of energy storage for global sale, according to Xinhua.

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As the world shifts to using more renewable energy sources, Tesla will be able to increase the output of its megapack lithium-ion battery units and reduce costs by taking advantage of China's leading battery supply chain to meet global demand for energy storage as the world shifts to a more renewable energy source.

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Musk, the CEO of Tesla, has committed to growing his solar energy and battery business to about the same size as the company's electric car business, which accounts for most of Tesla's revenue.

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The Chinese battery giant CATL (300750. SZ) has also deepened its collaboration with clients including Tesla in the area of energy storage batteries, which its Chairman Robin Zeng expects to be one of the largest markets for batteries for electric vehicles (EV).

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Currently, Tesla has built a Megafactory in Lathrop, California, which can manufacture 10,000 Megapacks in a year.

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During the second quarter of 2019, the company started producing Model 3 cars in Shanghai and is now able to produce 22,000 cars per week in the city.

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The Gigafactory Shanghai, Tesla's most productive auto production plant, plans to be expanded to be able to produce an additional 450,000 units annually.

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As the demand for its goods started to weaken in the third quarter, the U.S. company had to deal with a high stock level in Shanghai, resulting in aggressive price cuts in its major markets worldwide in January as a result.

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Chinese EV sales are slowing in the first two months of 2023, the world's largest auto market, with a growth rate of 20.8% compared with 150% in the same period last year.