Tesla to Build Factory in Shanghai for Large-Scale Batteries

The company plans to break ground this year on a plant that will produce 10,000 of its energy-storage units known as Megapacks annually.

Tesla will build a factory in Shanghai to manufacture its large-scale energy-storage battery known as the Megapack, the Chinese state news agency Xinhua reported on Sunday.

Tesla, which is owned by Elon Musk, will break ground on the plant in the third quarter of this year and start production in the second quarter of 2024, Xinhua reported.

The new factory will complement Tesla’s existing plant in Shanghai, where it makes electric vehicles, and it will initially produce 10,000 Megapacks a year, equal to around 40 gigawatt-hours of energy storage, to be sold globally, Xinhua said.

With the new plant, Tesla will take advantage of China’s dominant battery supply chain to increase output of its Megapacks, and to lower their costs, in hopes of meeting the rising global demand for energy storage as the world shifts to using more renewable energy.

Tesla generates most of its money from its electric-car business, but Mr. Musk has committed to expanding its solar energy and battery business to roughly the same size as its car business.

The Chinese battery giant CATL has been deepening its collaborations with clients, including Tesla, in supplies for energy-storage batteries. CATL’s chairman, Robin Zeng, expects energy-storage batteries to have a larger market than batteries powering electric vehicles.

Tesla already has a factory for its Megapacks in Lathrop, Calif., where it can manufacture 10,000 units annually.

The company began producing its Model 3 cars in Shanghai in 2019, and is now able to produce 22,000 cars there per week.

Tesla has struggled with rising inventory in Shanghai as demand began to weaken in the third quarter of 2022, leading to aggressive price cuts in its major markets globally in January.

Growth in sales of electric vehicles in China, the world’s largest auto market, has slowed to roughly 20 percent in the first two months of 2023.