Tesla is set to build a Shanghai factory to make megapack batteries, Xinhua reported

SHANGHAI, April 9 (Reuters) – Tesla Inc ( TSLA.O ) will build a factory in Shanghai to produce the megapack energy storage product, Chinese state media Xinhua reported on Sunday.

Elon Musk’s automaker will break ground on the plant in the third quarter and begin production in the second quarter of 2024, Xinhua said at the Shanghai signing ceremony.

The new factory will initially produce 10,000 megawatt units per year, equivalent to around 40 gigawatt hours of energy storage, to be sold globally, Xinhua said, making the existing Shanghai plant the largest maker of electric vehicles.

With the new Shanghai plant, Tesla will leverage China’s world-leading battery supply chain to increase production of its megapack lithium-ion battery units and meet the growing global demand for energy storage to harness renewable energy.

Tesla makes most of its money from its electric car business, but Musk is committed to growing its solar power and battery business to nearly the same extent.

Chinese battery company CATL ( 300750.SZ ) is also deepening its cooperation with customers including Tesla on energy-storage battery supplies, and its chief Robin Zheng expects a bigger market than batteries that power electric vehicles (EV).

Tesla currently has a megafactory in Lathrop, California, capable of producing 10,000 megapacks per year.

The company started manufacturing Model 3 cars in Shanghai in 2019 and now has a production capacity of 22,000 units per week.

Tesla Gigafactory Shanghai plans to expand its high-capacity automaking plant to add 450,000 units a year, Reuters reported last May.

However, the US firm struggled with rising inventories in Shanghai as demand began to weaken in the third quarter, leading to aggressive price cuts in its key markets worldwide in January.

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EV sales growth in China, the world’s largest auto market, has slowed to 20.8% in the two months to 2023, down from 150% in the same period a year ago.

Josh Horwitz, Zhang Yan Report; Editing: William Mallard and Toby Chopra

Our Standards: Thomson Reuters Trust Principles.

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