Tesla's Shanghai energy storage Megafactory begins trial production

SHANGHAI -- US carmaker Tesla's Shanghai energy storage Megafactory has begun trial production, serving as a good example of cooperation between China and the United States to address climate challenges.

The new plant is dedicated to manufacturing Megapacks, Tesla's energy-storage batteries, with mass production expected to commence fully in the first quarter of 2025, Tesla China told Xinhua on Tuesday.

The facility was built with an initial annual production capacity of 10,000 units, equal to around 40 gigawatt-hours of energy storage, according to the company.

The project is Tesla's second plant in Shanghai, underscoring the US company's commitment to investing in the world's second-largest economy, its confidence in China's manufacturing capabilities, and the strengthened economic ties between the two countries in the new energy sector, Wu Qisheng, a researcher at the Shanghai Academy of Social Sciences, told Xinhua.

Trial production was launched just seven months after construction began, setting a new record for "Tesla speed" in China, with the Shanghai Gigafactory -- Tesla's first plant in the country's eastern financial hub -- having been built and inaugurated within a year in 2019.

Covering an area of approximately 200,000 square meters, the new plant represents a total investment of about 1.45 billion yuan (about 201.7 million US dollars), according to the administration of the Lin-gang Special Area of China (Shanghai) Pilot Free Trade Zone.

The Megafactory is the first of its kind that Tesla has built outside the United States. At its launch ceremony in May, Tesla signed a deal with Shanghai Lingang Economic Development (Group) Co Ltd, securing the first batch of orders for its Megapacks in China.

Lauding China's efforts to develop the new energy industry, including the energy storage sector, Tesla Vice President Tao Lin in May told Xinhua that the country offers a complete industrial chain, vast market potential, and a production and business environment crucial for enterprise growth.

As a global renewables powerhouse, China is a major market for energy storage. In 2023, its installed renewable energy capacity surpassed its thermal power capacity for the first time, accounting for approximately 50 percent of all additions to the global renewable energy capacity.

Tesla's energy storage technology has already achieved a high level of commercialization and market success in the United States, said Liu Qing, vice president of the China Institute of International Studies. There remains room for market-driven cooperation between China and the United States in addressing climate challenges, particularly in advancing energy storage and energy-saving technologies.

Wu Xinbo, head of the Institute of International Studies at Fudan University, credited the rapid construction of Tesla's new factory to China's world-class infrastructure capabilities and the exceptional business environment offered by Shanghai and the broader Chinese market.

Tesla has not been alone in strengthening its commitment to the Chinese market this year. A record 52,379 foreign-invested companies were established in China in the first 11 months, an 8.9 percent increase from the previous year. In November, foreign direct investment in the Chinese mainland in actual use also saw a 6 percent year-on-year rise, data from the Ministry of Commerce shows.

In a bid to help foreign investors leverage its supply chain, market potential and innovation strengths, China has made significant strides in its opening-up.

Throughout 2024, the Chinese government has rolled out a range of key measures to foster a more welcoming environment for global investors. These measures included expanding access to key industries and launching pilot programs to facilitate foreign investment.

A key move was the rollout of the 2024 national negative list for foreign investment, effective Nov 1, which removed all market access restrictions for foreign investors in China's manufacturing industry. This unprecedented breakthrough overcame the final hurdles that global manufacturers face when entering a pillar industry in China.

In October 2024, the 3-millionth vehicle produced by Tesla's Gigafactory in Shanghai rolled off the assembly line. Of the total, one-third have been sold to markets outside the Chinese mainland, including Europe and the Asia-Pacific, the company said.

The first three quarters of this year saw the Shanghai factory deliver 675,000 vehicles, accounting for over half of the company's global deliveries during the period.

"China-US economic and trade relations are fundamentally mutually beneficial. Attempts at 'decoupling' or severing industrial and supply chains will harm US industries," Wu Xinbo said, emphasizing that half of Tesla's global vehicle production capacity is based in Shanghai, with China playing a dominant role in the new energy vehicle supply chain.

Tesla's two Shanghai factories showcase the mutual benefits of China-US cooperation, demonstrating that decoupling is impractical as US investors cannot afford to forgo the vast opportunities of the Chinese market, he noted.