Tesla to Build New Megapack Battery Factory in Shanghai

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Published on:
April 13, 2023
Updated on:
April 17, 2023

In an exciting move for the electric vehicle industry, Tesla is increasing its investment in China with the introduction of a new Megapack battery factory in Shanghai. Construction of the new factory, which will generate 10,000 megapacks, is expected to begin in Q2 2024.  

Megapack Battery Tesla Factory in Shanghai

The new factory's output capacity will be equal to that of Tesla's Megafactory in California. These megapacks can be used to store extra solar renewable energy, offer grid backup power, and more. 

The Shanghai factory is anticipated to have a 10 GWh annual capacity or 100,000 Megapacks. Each unit has the capacity to supply 3,600 houses with electricity for an hour on average. Megapacks are designed for utilities and large-scale commercial projects, not vehicles.

According to a Wedbush Securities analyst, this development could be a game-changer for Tesla in the battery market. The Shanghai factory would enable Tesla to revamp its position in the battery market and reduce production costs because China is the world's largest producer of batteries. 

The all-new expansion will be close to Tesla's current factory in Shanghai, which creates the Model 3 and Model Y for the Chinese market.

Tesla Fremont factory

The news was announced at a time when Tesla's Fremont factory was experiencing production delays due to supply chain concerns and a global shortage of computer chips. The company will soon be able to diversify its manufacturing capabilities and become less dependent on its Fremont factory owing to the new factory in Shanghai.

Tesla's Fremont factory has been the company's primary output since it was acquired from Toyota in 2010. The factory produces Tesla Model X, Model Y, Model S, and Model 3. vehicles for the global market. 

The factory has been instrumental in Tesla's rapid growth over the past decade, but the company has faced a number of challenges there, including worker safety concerns and clashes with local authorities over COVID-19 safety protocols. 

Despite these challenges, Tesla has continued to expand its production capabilities. Tesla is also constructing a new plant in Austin, Texas, which will manufacture the Cybertruck, Semi truck, and other electric vehicles in addition to its factories in Fremont and Shanghai.

Tesla's Investment in China

The first Tesla factory Shanghai opened in 2019 and, in just a few years, became the primary manufacturing ground to meet the needs of the markets outside North America. It manufactures 22,000 electric vehicles in just a week and is still growing to meet the needs of the market. Tesla also makes cars near Berlin, Germany, and has plans for another overseas plant in Monterrey, Mexico.

Tesla and China's EV Market

China is the world's largest auto market, but as the economy has slowed this year, car sales there have fallen dramatically. With sales of 88,869 Shanghai-built EVs in March, a 35% increase over the same month last year, Tesla has been building ground with Chinese drivers. 

BYD sold 206,089 units last month and is leading the market, but Tesla is keeping up and is the second-largest EV manufacturer in China. In January, it reduced pricing in China for the second time in less than three months in an effort to increase sales as market demand slowed.

US-China Tensions and Tesla's Investment in China

The launch of Tesla's new factory in China comes at a time when the US government is advising American businesses to rely less on China due to escalating tensions between Beijing and Washington. 

A ten-year restriction on the construction of "advanced technology" facilities in China was imposed on US tech companies last year that receive federal support. In order to keep up with China's technological breakthroughs, President Biden signed a law in August allocating $280 billion to high-tech industries and academic research.

Final Thoughts

Tesla's new Megapack battery factory in Shanghai is a major investment for the company and a further expansion into the world's largest car market. The factory's production capacity will match that of Tesla's Megafactory in California, solidifying the company's lead in battery technology. 

The factory will not only allow Tesla to tap into the world's largest producer of batteries, but it will also help the company diversify its manufacturing capabilities and reduce its reliance on its Fremont factory, which has faced several challenges over the years. 

The investment also comes at a time of heightened US-China tensions and a push by the US government for American companies to become less reliant on China. With production expected to begin in 2024, the factory is a potential game-changer for Tesla on the battery front, and it will undoubtedly have a significant impact on the future of sustainable energy.

Frequently Asked Questions

Is Tesla building a factory in China?

A new Megapack battery facility is being built by Tesla in Shanghai, China.

Where is Tesla building batteries?

The Gigafactory in Sparks, Nevada, owned by Tesla, is currently the largest power producer in the United States. But Tesla is also constructing Gigafactory Shanghai, China for megapack batteries.

Who is the major battery supplier to Tesla?

Tesla has partnered with Panasonic for a very long time, and it is one of Tesla's main battery suppliers. However, LG Energy Solutions, the second-largest battery provider in the world, is also a partner of Tesla.

What company makes Tesla's batteries?

Panasonic and LG Energy Solutions currently manufacture batteries for Tesla.

When will the new Tesla Megapack battery factory in Shanghai start production?

Construction on the factory will start later this year, and battery production is anticipated to start by the summer of 2024.