Tesla is set to expand its reach in China by building a new factory to produce its large-scale batteries. The Shanghai plant will have the capacity to produce 10,000 of the company’s “Megapack” energy storage units annually. The Megapack is a massive battery that can help stabilize energy grids and prevent power outages. The company already has a similar plant in California, which produces 10,000 units yearly.
Tesla’s new Megapack plant in China is expected to commence construction later this year, with battery production scheduled to start in the summer of 2024, according to Chinese state media outlet Xinhua. By producing in China, Tesla can tap into the country’s status as the world’s largest battery producer, which should help the company reduce production costs and increase output.
The announcement of Tesla’s Chinese expansion comes amid rising tensions between Beijing and Washington. The US government has been urging American companies to reduce their reliance on China, and last year, technology firms that receive federal funding were banned from building “advanced technology” facilities in China for ten years. This guideline was part of a $50bn plan aimed at building up the US semiconductor industry. In August, President Biden signed a law committing $280bn to high-tech manufacturing and scientific research to prevent the US from losing its technological edge to China.
Tesla has been expanding its presence in China since it opened its first factory outside the US in Shanghai in 2019. The plant currently produces 22,000 vehicles a week, and the company has announced plans for another overseas plant in Monterrey, Mexico. China, which is the world’s largest car market, has seen a significant decline in vehicle sales this year due to a slowdown in the economy. Tesla has cut prices on models made at its Shanghai plant in response to tough competition in the country and a backlog of unsold vehicles.
Tesla’s latest move to build a Megapack plant in China is a strategic move that will help the company maintain its competitive edge and capitalize on China’s vast battery production capabilities. As Tesla expands its footprint in the country, it will be interesting to see how the company navigates the challenging geopolitical landscape and its impact on the automotive industry.