According to the firm and its CEO, Elon Musk, Tesla Inc. is moving farther into the nation at a time when relations between the United States and China are tense by constructing a factory in Shanghai to manufacture its Megapack battery.
According to Chinese state media Xinhua News Agency, the new factory where Tesla will produce its high-capacity battery for energy storage is expected to break ground in the third quarter of this year and begin production in the second quarter of 2024. Tesla invested money, but it wasn’t immediately apparent how much.
Tesla announced its intention to create 10,000 Megapack units annually in a tweet that included a picture of a signing ceremony. The product will be offered all over the world and has an energy storage capacity of roughly 40 gigawatt hours, according to Xinhua. According to Tesla, a Megapack unit can store enough energy to run 3,600 houses for an hour on average.
Tesla, which already has a car plant in Shanghai, is planning to expand its operations there at a time when geopolitical tensions between Washington and Beijing are on the rise and economic uncertainty in China persists, making many U.S. companies hesitant to make fresh investments there.
China will make up roughly a quarter of Tesla’s revenue in 2022, making it the company’s second-largest market behind the United States.
Almost half of the company’s global car deliveries come from its car facility in Shanghai, which is situated on the outskirts of the city.
Competitors in China Strive for Tesla’s Crown
A wave of Covid-19 infections among employees and suppliers forced Tesla to halt production at its Shanghai facility on three instances last year, including early on during the city’s pandemic lockdown and again in December.
Tesla faces competition in China from domestic manufacturers of comparable and less expensive electric vehicles, such the Warren Buffett-backed BYD Co., the American-listed NIO Inc., and XPeng Inc.
As material costs decreased in October, Tesla lowered the prices for vehicles sold in China and provided a range of incentives to customers. After seeing a sharp decline in December in deliveries of its Shanghai-built automobiles, it cut prices once further in January.
Utility-scale power storage, such as storing wind and solar energy for later use, is possible using Tesla’s Megapack batteries. About 5% of Tesla’s income in 2022 will come from the production and storage of energy, which is a relatively tiny fraction of the company’s overall operation.
According to a filing, Tesla already operates a Megapack plant in Lathrop, California, and is currently expanding its output there. In a tweet, Mr. Musk said that the manufacturing in Shanghai will boost production at the Megapack facility in California.
China-US tensions are getting worse. The highest-ranking American official that a Taiwanese leader has met on American territory was House Speaker Kevin McCarthy, whom Taiwanese President Tsai Ing-wen visited last week in California. China retaliated by sending an aircraft carrier and starting live-fire drills against Taiwan.
Secretary of State Antony Blinken’s trip to Beijing in February was cut short by a Chinese balloon. Eventually, the balloon was shot down. According to US officials, it was gathering intelligence over vital American national-security facilities. According to China, the balloon that veered off course was a civilian device intended primarily for meteorological research.
