Tesla signs agreement to open Megapack factory in Shanghai, says report

Elon Musk is looking to increase the company's solar and battery business as car sales dip.
Ameya Paleja
Tesla's Gigafactory 3 in Shanghai
Tesla's Gigafactory 3 in Shanghai


Elon Musk's Tesla Inc. has unveiled plans to build a new factory to build its Megapacks, a large-scale lithium-ion battery storage solution in Shanghai, a Reuters report said. The output capacity of this plant will be roughly 10,000 Megapacks a year, equivalent to that of its Lathrop, California facility in the U.S.

Megapacks are container-sized lithium-ion battery packs that can store up to 3.9 Megawatt-hours (MWh). The large capacity packs are intended for use by utility companies as they look for solutions to store energy generated from renewable sources like solar and wind energy. Megapacks connected to the grid can supply additional power during peak demand.

Tesla focuses on increasing the battery business

Reuters cited a Chinese local media report that Tesla had signed documents to make a factory in Shanghai, near its Gigafactory, where it produces its brand of electric vehicles. The company is expected to break ground in the third quarter of this year, while production is expected to begin in the second quarter of 2024.

The upcoming plant's production capacity is estimated to be 10,000 Megapacks a year, similar to what the company produces at its Lathrop Megafactory facility in California every year. However, having changed its headquarters to Texas, Tesla is looking to tap into China's battery supply chain to reduce its costs and increase the output of its battery pack business, as more countries shift to renewable energy sources.

Tesla signs agreement to open Megapack factory in Shanghai, says report
Stock image representing large energy storage solutions

Tesla's major source of revenue is its electric vehicle business. Its Shanghai Gigafactory which was the hot topic of debate during the peak COVID-19 pandemic is being tuned up to produce a million vehicles a year. Estimates suggest that a third of cars sold by Tesla globally last year came from the Shanghai production facility, which was set up only in 2018.

However, a slowdown in demand for electric vehicles amidst rising inflation has meant that Tesla is now dealing with an increase in unsold inventory of its cars, risking its revenues. Tesla is looking to boost demand by slashing the prices of its cars, something it has done five times starting January this year.

Elon Musk is looking to increase Tesla's battery and solar energy business to the same level of revenue that its EVs generate and higher production capacities with lower input costs is one of the ways, it can remain competitive in the global markets.

Whether renewable energy storage solutions now help revive Tesla's potentially sagging fortunes, remains to be seen.

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