Tesla Plans Shanghai Factory for Megapack Battery Production

Tesla Inc. (TSLA) said it will build a factory in Shanghai to make 10,000 Megapack battery units a year, seeking to capitalize on growing demand for energy storage as lithium prices slump by more than half.

Work will begin on the plant in the third quarter and production is expected to start in the second quarter of 2024. It will complement a factory in Lathrop, California that can also make 10,000 Megapack batteries a year and add to Tesla's presence in Shanghai, where it has a Gigafactory able to produce 22,000 cars a week. Reuters reported last year that Tesla plans to produce 450,000 cars a year in the Chinese city.

Tesla is taking advantage of growing demand for energy storage as lithium prices fell by more than 57%. Tesla said it earned $3.9 billion from its Energy Generations and Storage segment last year, an increase of 40% from 2021.

The EV maker is ramping up its footprint in China despite recent diplomatic tensions with the U.S. Chinese state media first reported the news and said the new plant will provide 40-gigawatt hours of energy storage that will be sold on the global market. 

The International Energy Administration (IEA) has said energy storage is crucial to the Net Zero 2050 commitments and expects grid-scale battery storage capacity to expand “44-fold between 2021 and 2030 to 680 GW”. Each Tesla Megapack unit can store more than 3 MWh of energy—enough to power 3,600 homes for one hour.