Tesla to build Shanghai gigafactory for energy storage product
TESLA will build a gigafactory in Shanghai to make the Megapack energy storage product, Chinese state media outlet Xinhua reported on Sunday (Apr 9).
Elon Musk’s carmaker will break ground on the plant in the third quarter and start production in the second quarter of 2024, Xinhua reported from a signing ceremony in Shanghai.
Tesla will manufacture its Megapack large-scale energy-storage unit in the new facility, which adds to the company’s gigafactory for electric vehicles in Shanghai and deepens its investment in China.
The Megapack is intended as a massive battery to help stabilise energy grids, with the company saying each unit can store enough energy to power an average of 3,600 homes for one hour.
The factory will initially produce 10,000 Megapack units a year, equal to around 40 GWh of energy storage, to be sold globally, Xinhua said.
Lu Yu, a local official, said the new battery factory was expected to create an “industrial cluster” worth more than US$14 billion, the official news agency reported.
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Tesla generates most of its money from its electric vehicle (EV) business, but Musk has committed to grow its solar energy and battery business to roughly the same size.
Chinese battery giant CATL has also been deepening its collaborations with clients including Tesla in energy storage battery supplies, which its chairman Robin Zeng expected to have a larger market than batteries powering EVs.
Tesla has a factory producing Megapacks in Lathrop, California, capable of manufacturing 10,000 units per year.
The company began producing Model 3 cars in Shanghai in 2019, and now is capable of producing 22,000 cars per week.
Tesla planned to expand the Shanghai gigafactory, its most productive automaking plant, to add an annual capacity of 450,000 units, Reuters reported last May.
The US company, however, had grappled with rising inventory in Shanghai as demand started to weaken in the third quarter, leading to aggressive price cuts in its major markets globally in January.
EV sales growth in China, the world’s largest car market, has slowed to 20.8 per cent in the first two months of 2023, from 150 per cent in the same period a year ago.
Tesla’s deepening China investment comes shortly after France’s Airbus announced plans to double its production capacity in the country for one of its top-selling jets. The European planemaker will add a second final assembly line for A320 narrow-bodies at its existing factory in Tianjin, under a deal signed by chief executive officer Guillaume Faury in Beijing last Thursday.
The new manufacturing projects give a boost for Chinese industry as other firms such as Apple. rethink production in the nation amid heightened tensions with the US over everything from an alleged Chinese spy balloon being shot down over American skies to Beijing’s partnership with Russian President Vladimir Putin.
China, home to rising global electric vehicle star BYD, is an extremely important market for Tesla. Its existing car factory, which it owns outright, on the outskirts of Shanghai produced almost 711,000 cars last year, or 52 per cent of the US EV-maker’s worldwide output – even with production being disrupted by the China’s now-abandoned Covid-Zero policy – and Musk has long benefited from his close ties to Beijing.
Authorities rolled out the red carpet to help Tesla set up its first plant outside the US in early 2019, and Shanghai government officials assisted the company with resuming production in a timely manner after pandemic-related disruptions.
Musk’s time operating in China has not been entirely smooth, however. An expansion of the Shanghai EV plant was delayed over data concerns about Tesla’s connections to Musk’s Internet-from-space initiative Starlink, people familiar with the matter said earlier this year, days after angry Tesla owners swarmed showrooms in China to complain about missing out on another round of price cuts.
Tesla cars also were banned from Chinese military complexes and housing compounds in early 2021 over concerns about sensitive data being collected by cameras built into the vehicles.
Musk said on an earnings call in January that China is the most competitive car market. He made similar comments before, including during an online forum in September 2021, when he said he had “a great deal of respect for the many Chinese automakers”. REUTERS, BLOOMBERG
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