Tesla’s energy storage gigafactory in Shanghai has commenced trial production, with full-scale production anticipated early next year. This marks Tesla’s first stationary battery manufacturing facility outside the United States. The plant will primarily produce Megapack, a high-capacity commercial energy storage product designed for global markets. The factory is expected to manufacture up to 10,000 units annually, providing a total energy storage capacity of 40 GWh.
The Megapack battery stores energy for the city grid to help stabilize it and prevent power outages. According to Tesla, each unit can deliver up to 3 MWh of electricity, enough to power 3,600 homes for an hour. The batteries are made up of lithium iron phosphate cells, the type used in the company’s Powerwall and Powerpack home and business energy storage products.
Local media reported that the company’s Shanghai gigafactory has already signed its first orders for Megapacks. At the facility’s opening ceremony in May, it secured a deal with Shanghai Lingang Economic Development Group for the first set of orders.
Tesla will use its new facility to make its Powerwall and Powerpack energy-storage batteries and the lithium-ion cells needed to build them. Its other two gigafactories are located near Berlin and near the company’s vehicle manufacturing plant in Nevada, where it builds its Model Y electric SUV.
Investors will want to see whether the Shanghai facility can meet its full production target of 10,000 units per year when it begins mass production in 2025. Its construction is also a testament to Tesla’s commitment to investing in China, defying the rhetoric of “decoupling” and de-risking from the world’s second-largest economy ratcheted up by some American politicians.
Despite its ambitious investment plans, Tesla has struggled to find customers for its stationary battery products. Last quarter, its revenue from its energy business fell by more than 50% from a year ago as deliveries slumped. The company is slated to report its fourth-quarter results on Jan. 2, and investors are looking for signs that its production and delivery numbers have begun to rebound from their recent slump. Investors should keep an eye on Tesla’s battery and energy storage production numbers and its car-making operations in the coming months.