Tesla to build new Shanghai factory for Megapack battery

HONG KONG – Tesla will build a new battery factory in Shanghai, increasing its investment in China at a time of brewing tensions between Beijing and Washington.

Tesla will manufacture its Megapack large-scale energy storage unit at the new facility, which adds to its factory for electric vehicles (EVs) in Shanghai.

The company led by billionaire Elon Musk, who is said to be visiting China this weekend, made the announcement at a signing ceremony for the project in Shanghai. Also at the event were Mr Tom Zhu, Tesla’s senior vice-president of automotive, and Shanghai government officials, including Vice-Mayor Wu Qing. Tesla’s vice-president Tao Lin signed the contract.

Construction of the plant is scheduled to begin in the third quarter of this year and the factory will commence production in the second quarter of 2024, the company said in a statement.

Tesla’s deepening China investment comes shortly after France’s Airbus announced plans to double its production capacity in the country for one of its top-selling jets. The European planemaker will add a second final assembly line for A320 narrow-body aircraft at its existing factory in Tianjin, under a deal signed by chief executive officer Guillaume Faury in Beijing on Thursday. 

The new manufacturing projects give a boost to Chinese industry as other firms like Apple rethink production in the nation amid heightened tensions with the United States over everything from an alleged Chinese spy balloon shot down over American skies to Beijing’s partnership with Russian President Vladimir Putin.

The Megapack is intended as a massive battery to help stabilise energy grids, with the company saying that each unit can store enough energy to power an average of 3,600 homes for one hour. The new factory will initially produce 10,000 Megapack units every year, equal to around 40 gigawatt-hours of energy storage, and the products will be sold worldwide.

China, home to rising global EV star BYD, is an extremely important market for Tesla. Its existing car factory on the outskirts of Shanghai, which the US firm owns outright, produced almost 711,000 cars last year, or 52 per cent of its worldwide output – even with production being disrupted by China’s now-abandoned zero-Covid policy.

The authorities rolled out the red carpet to help Tesla set up its first plant outside the US in early 2019, and Shanghai government officials assisted the company with resuming production in a timely manner after pandemic-related disruptions.

Mr Musk’s time operating in China has not been entirely smooth, however. An expansion of the Shanghai EV plant was delayed over data concerns about Tesla’s connections to Mr Musk’s Internet-from-space initiative Starlink, people familiar with the matter said earlier this year, days after angry Tesla owners

swarmed showrooms in China

to complain about missing out on another round of price cuts.

Tesla cars were also

banned from Chinese military complexes

and housing compounds in early 2021 over concerns about sensitive data being collected by cameras built into the vehicles.

Mr Musk said on an earnings call in January that China is the most competitive car market. He has made similar comments before, including during an online forum in September 2021, when he said he has “a great deal of respect” for the many Chinese carmakers.

BLOOMBERG