Tesla's Shanghai Factory Plans for Megapack Battery Production

Lithium prices fell by more than half as Tesla Inc (TSLA) said it would build a factory in Shanghai to make 10,000 megapack battery units a year, seeking to capitalize on rising demand for energy storage. 

Key TakeAways

• Tesla will build a 10,000 megapack battery plant in Shanghai.
• The new factory will complement similar production levels at its California base.
• Decline in lithium and rising demand for energy storage could drive revenue growth. {alertSuccess}

Work on the plant will begin in the third quarter and production is expected to begin 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 bolster Tesla's presence in Shanghai, where one of its gigafactory is capable of producing 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 rising demand for energy storage as lithium prices have dropped by more than 57%. Tesla said it earned $3.9 billion from its Energy Generation and Storage segment last year, a 40% increase from 2021.

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

The International Energy Administration (IEA) has said that energy storage is critical to Net Zero 2050 commitments and expects grid-scale battery storage capacity to increase "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.