Tesla secures a site in Shanghai to build its Megapack energy-storage battery plant

The US carmaker will produce 10,000 massive batteries a year at the Megafactory in Shanghai’s Lingang free-trade zone
‘The battery plant shows that Tesla is resolute in tapping China’s new-energy market,’ says analyst

Electric & new energy vehicles

Daniel Renin Shanghai

Published: 5:00pm, 22 Dec 2023

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Tesla has bought a parcel of land in Shanghai for a factory where it will build its Megapack large-scale batteries, according to Xinhua, the state news agency.

The US carmaker will produce 10,000 massive batteries a year at the Megafactory in Shanghai’s Lingang free-trade zone (FTZ) when construction of the plant is complete. A land acquisition agreement was signed on Friday morning, Xinhua said.

“After securing the site, Tesla will officially launch the project with substantial steps taken to get production up and running,” said Gao Shen, an independent analyst in Shanghai. “The battery plant shows that Tesla is resolute in tapping China’s new-energy market.”

Shanghai Communist Party boss Chen Jining told Tesla CEO Elon Musk in a meeting during the billionaire’s trip to mainland China in June that the American company was welcome to bring new products, technologies and services to the mainland’s financial and commercial centre.

Construction had been expected to begin in the third quarter of this year, with the plant scheduled to start operations in the second quarter of 2024, Tesla said in a statement in April when it signed a pact with the Lingang FTZ administration commission.

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Xinhua did not mention a possible new time frame in its report on Friday.

Each Megapack battery can store enough energy to power 3,600 homes for one hour. The Shanghai factory will churn out batteries with a total energy storage capacity of 40 gigawatt-hours (GWh) a year.

It will be Tesla’s first manufacturing facility for energy-storage batteries outside the US and the company’s second plant in Lingang, where its Gigafactory 3 is capable of producing up to 1 million cars annually.

Xinhua described the battery plant as a milestone project for Tesla.

The energy storage products will be sold in both China and markets outside the mainland.

In October, Tesla said in its earnings report that it raked in revenue of US$1.56 billion from the energy-storage battery business during the three months ending September.

Electric vehicles (EVs) and lithium iron batteries are crucial for Beijing’s goals of reaching peak carbon emissions by 2030 and carbon neutrality by 2060.

The Shanghai Gigafactory, which began assembling Model 3 cars at the end of 2019, delivered 710,000 vehicles last year, more than half of Tesla’s total output of 1.31 million units.

But Tesla has put on hold plans for a second EV assembly line in Shanghai after it failed to get approval from mainland authorities, the Post reported in January. The new line was expected to double the Shanghai factory’s capacity to 2 million units a year.

Tesla has been the runaway leader in China’s premium EV segment since the Shanghai factory, the company’s biggest production base worldwide, began delivering vehicles in January 2020. Currently, only the Model 3 and Model Y cars are produced there by the Texas-based carmaker.

Tesla is now facing a stiff challenge from several Chinese home-grown players like Li Auto and Xpeng, both of which broke monthly sales records in November.

Li Auto, which recently joined the Hang Seng Index as one of its new constituents, reported deliveries of 41,030 units last month, up from 40,422 in October. Xpeng handed over 20,041 vehicles to buyers, just topping its October total of 20,002.