The announcement of Tesla’s battery factory in Shanghai marked the company’s entry into the Chinese market. Amy Zhang, analyst at InfoLink Consulting, looks at what this move could bring for the US battery storage maker and the broader Chinese market.
Electric vehicle and energy storage maker Tesla initiated its Megafactory in Shanghai in December 2023 and completed the signing ceremony for land acquisition. Once delivered, the new plant will span an area of 200,000 square meters and come with a price tag of RMB 1.45 billion. This project, which marks its entry into the Chinese market, is a key milestone for the company’s strategy for the global energy storage market.
As demand for energy storage continues to grow, the China-based factory is expected to fill Tesla’s capacity shortage and become a major supply region for Tesla’s global orders. Moreover, as China has been the largest country with newly installed electrochemical energy storage capacity in recent years, Tesla is likely to enter the country’s storage market with its Megapack energy storage systems produced in Shanghai.
Tesla has been scaling up its energy storage business in China since the beginning of this year. The company announced its construction of the factory in Shanghai’s Lingang pilot free trade zone earlier in May, and signed a supply deal of eight Megapacks with Shanghai Lingang Data Center, securing the first batch of orders for its Megapacks in China.
Currently, China’s public auction for utility-scale projects saw fierce price competition. The quote for a two-hour utility-scale energy storage system is RMB 0.6-0.7/Wh ($0.08-0.09/Wh) as of June 2024. Tesla’s product quotes are not competitive against the Chinese manufacturers, but the company has rich experiences in global projects and a strong brand impact.