Tesla eyes closer ties with China supply chain with new Shanghai factory

Nuying Huang, Taipei; Rodney Chan, DIGITIMES Asia 0

Credit: AFP

Tesla, with its new factory for energy storage products in Shanghai, is eyeing closer ties with local industry supply chains in China, according to sources at Chinese power component suppliers.

Tesla has a plan to build a Megafactory in Shanghai to produce its energy storage battery products, Megapacks. Tesla aims to make 10,000 Megapacks per year initially. Megafactory Shanghai will be the company's first energy storage project outside the US.

According to China-based Securities Daily, the 10,000 Megapacks are expected to offer a capacity of 40GWh. Tesla plans to start construction of the plant in the third quarter of this year and begin production in the second quarter of 2024.

The project is expected to facilitate the formation of a local industry cluster, which the US electric vehicle (EV) vendor will rely on, industry sources said.

Leading Chinese battery maker CATL will have a key role to play in the local ecosystem supporting Tesla's Megafactory, the sources added.

Tesla has already disclosed plans to sharply reduce the use of SiC in its cars, but the sources said that for its Megafactory, the more pressing issue is not about choosing between SiC or IGBT for its technological needs. The most important thing is to secure business opportunities in China's energy storage market, the sources said.

For energy storage businesses, connecting to the grid could be a political matter in China, where the central government is heavily involved in distributing resources for electricity supplies and grid deployments, the sources said. With the US-China tensions intensifying, it will be difficult for a US company, such as Tesla, to play a role in China's grid deployments, the sources said.

The sources said a substantial portion of the lithium batteries for Tesla's EVs and energy storage products is supplied by Chinese makers, such as CATL. For Tesla to expand its presence in the EV and energy storage markets in China and other parts of the world, lithium battery supplies from China are crucial, the sources said, adding Tesla must strengthen its ecosystem in China.

Some Chinese media reports have disclosed that Tesla CEO Elon Musk visited CATL soon after the Shanghai Megafactory plan was made public.