Tesla kickstarts Shanghai Megafactory for energy storage

Tesla has officially commenced production at its newly constructed Megafactory in Shanghai, a new milestone in its rapidly expanding energy storage division. This facility is Tesla’s second dedicated energy storage production plant and has already rolled out its first Megapack unit, with initial orders ready for shipment.

While Tesla’s core automotive business has recently encountered challenges, including declining revenues and tightening profit margins, its energy storage sector has demonstrated strong growth. The Megapack, Tesla’s utility-scale battery storage solution, has been a major driver of this success.

With production ramping up at its original Megafactory in California, Tesla is now further expanding its capabilities with the Shanghai facility. It aims to streamline global logistics and cater to growing demand, particularly in the Asia-Pacific region.

40 GWh of energy storage

Situated in the Lingang district of Pudong, Shanghai, Tesla’s newest Megafactory broke ground in the spring of 2024. In an impressive display of efficiency, construction was completed within just seven months—underscoring Tesla China’s ability to execute large-scale infrastructure projects at a record pace. Following a trial production phase, the plant has now officially entered volume production.

The Shanghai Megafactory boasts an ambitious production capacity, with an annual output target of 10,000 Megapack units—translating to a total energy storage capacity of approximately 40 GWh annually. Each Megapack can store more than 3 MWh of energy, making it a crucial asset in stabilizing power grids and enabling a greater integration of renewable energy sources. 

Tesla has emphasized the Megapack’s scalability and modularity, positioning it as an optimal solution for preventing power outages and enhancing grid stability.

Beyond catering to domestic demand in China, Tesla has also confirmed that the first batch of Megapacks manufactured in the Shanghai facility will be exported to Australia. This market has been an early adopter of Tesla’s large-scale energy storage solutions.

Rising competition from BYD and CATL

Despite Tesla’s impressive growth in the energy storage sector, the company faces increasing competition, particularly from some of its own battery suppliers, BYD and CATL. Both of these Chinese manufacturers have developed their own large-scale energy storage systems, intensifying the competition within China’s rapidly growing energy storage market.

Additionally, other key industry players, such as Star Charge and GoodWe, are also accelerating their efforts to capture market share.

Tesla has responded to this competitive pressure by reducing Megapack prices over the past year. While this has made the product more attractive to buyers, it has also impacted profit margins. The increased production capacity of the Shanghai Megafactory is expected to ease supply constraints.