Tesla is opening a mega energy factory in Shanghai, China, which will boost energy for EVs in the world’s largest auto market.
The company said in a tweet on Sunday that the factory is capable of producing ten thousand Megapack energy products per year, supplementing output from the Megapack factory in California.
Our next Megafactory will be in Shanghai ??—capable of producing 10k Megapacks per year pic.twitter.com/KlVGq5gYOg
— Tesla (@Tesla) April 9, 2023
Xinhua, a Chinese state media outlet, which reported the news first, said the plant will begin production in the second quarter of 2024, after breaking ground on the plant in the third quarter.
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Per the report, the new factory will initially produce 10,000 Megapack units a year, equal to around 40 gigawatt hours of energy storage, to be sold globally. This will complement Tesla’s Shanghai electric vehicles manufacturing gigafactory.
Tesla CEO Elon Musk has been ramping up efforts recently to increase the company’s energy output as a way of boosting revenue growth amid declining demand for electric vehicles.
Lowering the cost of energy in line with its recent decision to cut the price of some Tesla models will likely boost sales for the world-leading EV maker.
With the new Shanghai plant, Tesla will take advantage of China’s world leading battery supply chain to ramp up output and lower costs of its Megapack lithium-ion battery units to meet rising demand of energy storage globally as the world shifts to use more renewable energy, per Reuters.
Tesla’s current energy Megafactory in Lathrop, California, has the capacity to produce 10,000 Megapacks per year. The Shanghai factory underscores Musk’s commitment to grow the company’s solar energy and battery business close to its car business – which remains its major source of revenue.
China is Tesla’s largest market but has seen a slowdown of up to 20.8% in the first two months of 2023, a decline from 150% in the same period last year.
The resulting drop in sales, buoyed by rising inventory in Shanghai, has forced Tesla to initiate price cuts in January, especially for its Model Y and Model 3 across its major markets globally, including Japan, South Korea and Australia.
Tesla is building another gigafactory in Berlin-Brandenburg, its first and most advanced manufacturing hub in Europe. The factory, also known as Giga-Berlin, is expected to be completed this year, and will manufacture hundreds of thousands of Model Y vehicles and millions of battery cells.
Tesla has so far produced 4 million vehicles and currently has capacity to manufacture 1.9 million cars per year. Musk’s vision is for Tesla to deliver 20 million cars annually by 2030, broadening the company’s energy needs.
Musk announced plan for sustainable energy early March, estimating a total $10 trillion for its accomplishment. The move to start a Megapack energy factory in Shanghai is thus seen as part of the plan.
Reuters reported that Chinese battery giant CATL has also been deepening its collaborations with clients including Tesla in energy storage battery supplies.
China has both the market and talent concentration, whenever a country has both, it’s well setup for leadership. No need to go into the intricacies of how these factors unbalance competitions.