Amid US-China Tensions... Tesla Builds 'Megapack' Energy Storage Facility in Shanghai (Comprehensive)

American electric vehicle company Tesla has decided to build a large-scale electric energy storage device, Megapack, production plant in Shanghai, China. Amid heightened US-China tensions this year due to issues such as the Chinese surveillance balloon and the China-Russia summit, reports have also emerged that Tesla CEO Elon Musk will soon visit Shanghai.

[Image source=Reuters Yonhap News]

According to Bloomberg News and China's Xinhua News Agency, Tesla signed a contract on the 9th (local time) in Shanghai to build the Megapack production plant, attended by Wu Qing, Vice Mayor of Shanghai, Tom Zhu, Tesla Senior Vice President, and Tao Lin, Tesla Vice President. Tesla's Megapack production plant will begin construction in the third quarter of this year and start production from the second quarter of 2024.

The new plant will be located within the Gigafactory, an electric vehicle production base in the Lingang Free Trade Zone of Shanghai. It is expected to produce 10,000 Megapacks annually for sale in the global market. The Megapack is a lithium-ion battery that supports energy grid stabilization. Tesla explained that each unit can store enough energy to supply power to an average of 3,600 households for one hour.

This investment draws attention as it was announced while China is actively attracting foreign investment under its 'With Corona' policy. Earlier, European aircraft manufacturer Airbus also announced the establishment of a second production line for final assembly of passenger aircraft in Tianjin, China, doubling its production capacity in China. Tesla's investment decision in China following Airbus contrasts with Western companies, including Apple, pursuing so-called 'de-China' moves amid deteriorating US-China relations. The Lingang Free Trade Zone authorities expect that this investment could create an industrial cluster worth 100 billion yuan (approximately 19.18 trillion KRW) locally.

For Tesla, China is also its largest overseas sales market. The Chinese market, the world's largest electric vehicle market, accounted for more than 22% of Tesla's sales last year. This is the second-largest market after the United States. Additionally, Tesla's Shanghai plant produced over 710,000 electric vehicles last year alone, accounting for more than 50% of Tesla's total production volume.

CEO Musk, who leads Tesla, is reported to visit the Shanghai plant this weekend. If so, it will be his first visit since the COVID-19 pandemic. This potential visit draws even more attention as it occurs amid further deterioration in US-China relations. There is also speculation about possible meetings with Chinese officials. However, Musk has remained silent about these reports since yesterday.

Bloomberg News also reported in another article that Musk's activities in China have not been smooth, citing delays in the Shanghai plant expansion plan due to data concerns related to Starlink and Tesla vehicle connectivity. Musk had identified China as the most competitive market during the early-year earnings announcement. The growth rate of electric vehicle sales in China slowed significantly to 20.8% in January-February 2023 from 150% in the same period last year.

Currently, Musk is reportedly planning to expand Tesla's solar energy and battery businesses as much as its electric vehicle business, which accounts for the main revenue. Tesla also operates a Megapack production plant in California with an annual capacity of 10,000 units.

This content was produced with the assistance of AI translation services.