Tesla to open battery factory in Shanghai as China seeks foreign investment

Tesla will open a factory in Shanghai to produce its Megapack large-scale batteries, cementing another foothold for the U.S. company in China even as political and economic tensions between Washington and Beijing swirl.

Tesla said in a brief tweet on Sunday that its “Megafactory” in Shanghai will be capable of producing 10,000 Megapacks annually, an output equivalent to its other Megafactory in Lathrop, California, about 70 miles east of San Francisco.

The company, which disbanded its public relations department, did not provide further details.

Elon Musk, Tesla’s chief executive, said in a tweet that the factory in Shanghai would “supplement” the production in California.

The Chinese factory will be built in Lingang, a suburban area of Shanghai where Tesla’s vehicle factory is also located, according to Chinese media.

Lu Yu, an official in Lingang, told local media that production could start as soon as the second quarter of 2024.

The investment in China by Tesla comes after the coronavirus pandemic brought some supply chains to a halt as factories in China shut down amid strict “zero covid” protocols.

With those setbacks still fresh in many executives’ minds – and amid concerns over alleged human rights violations and chilly relations between Washington and Beijing – China has struggled to attract foreign investment since the pandemic.

The Megapacks differ from most of Tesla’s consumer-focused offerings, like the electric vehicles it is widely known for, in that they are more a piece of energy infrastructure than a consumer product.

The batteries are intended to store energy from renewable sources such as wind and solar, allowing energy to be drawn even when the sun isn’t shining and the wind isn’t blowing.

Batteries like the Megapack are not yet widely implemented in the United States and purchases of the technology have mostly been kept under wraps.

But the Megapack has been bought for Apple’s renewable energy storage project in California, according to the Verge, and for a storage project outside Houston, Bloomberg first reported.

Having energy stored in such a manner could help “stabilize the grid and prevent outages,” Tesla says on its website.

Coal and natural gas are more commonly used for energy production in a pinch – like when warm temperatures cause more demand for electricity to power air conditioning units or when extreme weather hampers part of a power grid.

A Megapack, Tesla says, “stores energy for the grid reliably and safely, eliminating the need for gas peaker plants and helping to avoid outages.”

Each pack can store enough energy to power 3,600 homes for an hour, Tesla says.

One of the most notable and disastrous outages in recent history was the 2021 blackout in Texas that left millions without electricity after the state was hit by a winter storm.

Unlike other states, Texas operates on its own power grid – leaving it without the ability to restore power by drawing energy from other states, as is the case in other power grids across the country.

In theory, storage options like Megapacks could help avert such situations, or at least soften the blow of such weather events.

That makes storage options for renewable energy a matter of national security, energy and security experts have warned.

A report by the Center for Naval Analyses’ Military Advisory Board highlighted energy storage as a solution to “a growing number of threats to our homeland and national security.” It added that “advanced energy storage is a future requirement for meeting the full potential of a secure and resilient grid.”

It was not immediately clear how many of the Megapacks made in Shanghai would be sold in China. Chinese media reported that the Megapacks produced in Shanghai will be supplied worldwide.

The announcement comes as the United States has warned of competition with China over computer chips as a matter of national security.

President Biden signed the Chips Act into law last year, prodding investment into domestic semiconductor production in a bid to “strengthen supply chains, and counter China,” the White House said.