Tesla will build the Shanghai factory to make Megapack batteries, reports Xinhua

SHANGHAI, April 9 (Reuters) – Tesla Inc ( TSLA.O ) will build a factory in Shanghai to make its Megapack energy storage product, Chinese state media Xinhua reported on Sunday.

Elon Musk̵[ads1]7;s automaker will break ground 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 a large existing Shanghai plant that produces electric vehicles, the new factory will initially produce 10,000 Megapack units a year, equivalent to about 40 gigawatt hours of energy storage, to be sold globally, Xinhua said.

With the new Shanghai facility, Tesla will take advantage of China’s world-leading battery supply chain to increase production and reduce costs of its Megapack lithium-ion battery units to meet growing demand for energy storage globally as the world transitions 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 ( 300750.SZ ) has also deepened cooperation with customers including Tesla in energy storage batteries, which Chairman Robin Zeng expected to have a bigger market than batteries that power electric vehicles (EVs).

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

The company began manufacturing Model 3 cars in Shanghai in 2019 and is now capable of producing 22,000 cars per week.

Tesla planned to expand Gigafactory Shanghai, its most productive car factory, to add an annual capacity of 450,000 units, Reuters reported last May.

However, the US company had been struggling with rising inventories in Shanghai as demand began to weaken in the third quarter, prompting aggressive price cuts in key markets globally in January.

Electric car sales growth in China, the world’s largest car market, has slowed to 20.8% in the first two months of 2023, from 150% in the same period a year ago.

Reporting by Josh Horwitz, Zhang Yan; Editing by William Mallard and Toby Chopra

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