Amid US-China tensions, Musk's Tesla to build battery factory in Shanghai

Billionaire Elon Musk is looking to expand his investment in China even as Washington remains embroiled in a bitter diplomatic tussle with Beijing. Tesla will be building a new battery factory in Shanghai to make the Megapack energy storage product, Chinese state media outlet Xinhua reported on Sunday.g

The company will manufacture its large-scale energy-storage unit in a new facility whose construction is scheduled to begin in the third quarter of this year. The production will commence in the second quarter of 2024.

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Notably, Megapacks are Tesla's lithium-ion batteries, used for battery-storage power stations. It already has a factory producing Megapacks in Lathrop, California - churning out as many as 10,000 Megapacks a year.

According to reports, the new factory will also produce 10,000 Megapack units every year, equal to around 40 GWh of energy storage which will be sold worldwide.

Tesla's Shanghaigigafactory

Tesla already has an electric vehicle manufacturing facility in the city named Tesla gigafactory which was established in 2019. It is the carmaker's largest gigafactory outside the US.

Despite the supply chain constraints, the Shanghai plant delivered 710,000 vehicles in 2022 which was an increase of 48 per cent from 2021. However, the factory had a wobbly end to 2022 when workers refused to work due to a sudden spurt in COVID-19 cases.

WATCH | China: Tesla halts production at Shanghai plant; year-end closure comes as Covid cases rise

Musk's China visit

China is Tesla's second-largest market after the United States. Musk is expected to visit China this month which would mark his first visit to the country since the pandemic. More importantly, it will be his first meeting with Xi Jinping after he secured a third term as the country's president.

The visit comes at a crucial juncture when Beijing is attempting to rejig its economy, battered by three years of heavy-handed Covid curbs. With Apple considering moving its production away from China, Musk's investment through the new factory could be a message that the Chinese government may attempt to sell to prospective investors.

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However, given the strained relations between Beijing and Washington, especially in the backdrop of the spy-balloon sage, it will be interesting to observe how the Biden administration reacts.

(With inputs from agencies)

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