The US electric vehicle manufacturer Tesla announced over the weekend that it would build a “gigafactory” in Shanghai. The new facility in China will manufacture the company’s Megapack energy storage product. This was first reported by the Chinese state news agency Xinhua on Sunday.
The Megapack batteries are designed to store large amounts of electricity – a single Megapack can power 3,600 homes for one hour, according to Tesla. The batteries, which are about the size of an international shipping container, can store the electricity to power factories or homes at peak times when demand from the local grid is high, or during a power outage. So they are more of a part of the energy infrastructure than a consumer product. The megapacks are intended for storing energy from renewable sources such as wind and sun and can each store more than three megawatt hours.
groundbreaking later this year
The new factory will complement the existing plant in Shanghai for the assembly of electric vehicles and, like this, will be located in the Lingang Free Trade Zone near Shanghai. Groundbreaking for the new factory is expected to take place in the third quarter of this year and production to start in the second quarter of 2024, Tesla said at the project’s signing ceremony in Shanghai, Xinhua reports.
Accordingly, Tesla will use the Chinese battery supply chain to increase production of its megapack lithium-ion battery units and reduce costs. The factory will initially produce 10,000 Megapack units per year, which equates to approximately 40 gigawatt hours (GWh) of energy storage capacity. For comparison: This figure corresponds to one eighth of Mexico’s annual electricity production. According to Xinhua, the mega packs manufactured in Shanghai are to be sold worldwide.
Tesla is expanding
In January 2019, Tesla began building its first Gigafactory in Shanghai, becoming the first company to benefit from a new Chinese industrial policy that allows foreign automakers to set up wholly-owned subsidiaries in China. The Shanghai plant was Tesla’s first gigafactory outside of the United States. Last year, the plant delivered 710,000 vehicles.
Just a few weeks ago, Tesla boss Elon Musk announced the construction of another gigafactory in Mexico. The new assembly plant is to be built in Santa Catarina on the outskirts of the northern Mexican city of Monterrey, just a few hundred kilometers from Austin, where Tesla inaugurated its latest gigafactory in April 2022.
In addition to the aforementioned plants in Shanghai and Austin, the group currently has a battery mega-factory in Lathrop, California, which can produce 10,000 megapacks per year, according to the company’s website, and another plant in Grünheide near Berlin. In a tweet on Sunday, Tesla CEO Musk said the China factory will complement production from the California factory.
Tensions between the US and China
Tesla generates most of its revenue from its electric car business, but Elon Musk has promised to grow its solar power and battery businesses to about the same size.
The new plant in Shanghai is a step in this direction. At the same time, however, the US group is establishing another foothold in China at a time when the technology conflict between the USA and China is expanding. Washington wants to isolate the People’s Republic technologically and cut it off from the latest generation of semiconductors. The United States sees competition with China in computer chips as a matter of national security.
Last year, US President Joe Biden signed the Chips Act, which is intended to promote investment in domestic semiconductor production in order to strengthen supply chains and counteract China. China, in turn, warned of the US Chips Act and its consequences.