Tesla is opening a new factory in Shanghai in mid-2024, producing 10,000 Megapack energy products annually. This is an effort as the company plans to sell the produced Megapacks it makes in the new facility globally.
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A car drives past the new Tesla factory built in Shanghai on November 8, 2019.
Tesla Megapack Factory in Shanghai
As Tesla increases its investments in China amidst of heightened tensions between the United States and China, the company just announced that it would build a new battery factory in Shanghai, with its construction starting this year. Bloomberg reported that once the plant is done before the second half of 2024, it will produce 10,000 Megapacks per year.
The amount of these Megapacks is equal to approximately 40 gigawatt hours of energy storage. The produced products are planned to sell globally as Tesla takes advantage of China's world-leading battery supply chain, given that the company ramps up output and lower costs for its Megapack lithium-ion battery units.
The signing ceremony was attended by Tesla's Senior Vice President of Automotive Tom Zhu and Vice President Tao Lin, with several government officials from Shanghai, including Vice Mayor Wu Qing.
The construction of the announced plan is set to start in the third quarter of this year and is expected to start production in the second quarter of 2024. Tesla has currently several Megafactories located in different areas, including Lathrop, California, with some of its installations in Texas and South Australia.
Shanghai Facility
The Megapack factory complements the huge existing Tesla Shanghai plant that produces several models of its electric vehicles. In 2019, the company produced Model 3 cars in Shanghai and has now the capability to produce 22,000 units of cars per week.
Despite the company generating most of its earnings from its EV lineups, this effort is part of Chief Executive Officer Elon Musk's commitment to growing its solar energy and battery company that will compete with its EV earnings.
Tesla also plans to expand its EV facility in Shanghai by adding an annual capacity of 450,000 units. However, Reuters reported that the company struggled with the rising inventory in Shanghai as EV demand started to decrease in the third quarter of last year and led to aggressive price cuts in its major markets in January.
Increasing Reliance on China
This announcement comes after a time of brewing tensions between Beijing, China, and Washington, USA. As per Engadget's report, Tesla's investment increases its reliance on China amidst the usage of economic policy in the US that pushes companies and other manufacturers to produce products domestically.
The Treasury Department released an update last month regarding its guidance detailing what electric vehicle quality is for the Inflation Reduction Act and its $7,500 EV tax credit. As per the filing, companies must source the minerals in their car batteries from the US and other approved trading parts to qualify for an incentive.
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