Automotive and clean energy company Tesla plans to build a second mega factory in China that will manufacture 10,000 Megapack batteries per year, equal to around 40 gigawatts of hours of energy storage.
According to China state media outlet Xinhua, Tesla will break ground on the plant in the third quarter of this year, and start production in the second quarter of 2024. The company’s CEO Elon Musk disclosed that the opening of the new factory in Shanghai will supplement the output of the Megapack factory in California.
The new Shanghai factory will utilize China’s world-leading supply chain to increase output. The price of Tesla’s Megapack battery products is also expected to drop with increased production, which will help meet global demands.
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Tesla aims to deliver a cost-effective ramp of 4680 battery cells at all its facilities in 2023 to reach a high volume in 2024. The new low-cost and high-energy density cells will power not only already announced products but also those that are in development. Musk said that Tesla’s goal was to reach 1,000 gigawatt hours of annual battery storage production (1 terawatt hour per year). The company also operates a Gigafactory in Shanghai that is capable of producing 22,000 units of automobiles weekly.
Meanwhile, while Tesla plans to explain its factory annual capacity, the growth of EVs in China slowed to 20.8% in the first months of 2023, a sharp decline from 150% in the same period in 2022 which saw it miss market expectations for fourth-quarter deliveries despite shipping a record number of vehicles. This saw the automotive company’s performance in 2022 among the worst on S&P 500 index.
Even before the unimpressive performance at the start of the year, Tesla’s market cap plunged a whopping 65% over the last 12 months as it weathered supply chain problems, slowed demand in China, and blowback over Musk’s controversial actions as head of Twitter. The automotive company has however grappled with rising investing in Shanghai, China, as demand weakens, which has led to a massive price cut. It is also offering subsidies for insurance costs.
Although the majority of Tesla’s production is currently coming from its Shanghai factory in China, Tesla is aiming to produce 1.8 million vehicles worldwide this year so it’s likely it will be earning billions of dollars a year from the credits in the near future. Also, global automakers have in the past few months battled a demand downturn in China, the world’s top auto market where the spread of covid-19 has hit economic growth and consumer spending.
Several Wall Street analysts say they expect more pressure on Tesla’s stock in the coming months as it continues to face stiff competition from other automakers and weaker global demands.