Tesla secures a $557 million agreement to manufacture its initial Grid-Scale Megapack Energy Storage Facility in Shanghai.

Tesla secures a $557 million agreement to manufacture its initial Grid-Scale Megapack Energy Storage Facility in Shanghai.

In a significant development for Tesla's energy business in China, the American electric vehicle giant has signed a deal worth ¥4 billion with China Kangfu International Leasing Co. and the Shanghai municipal government to build a grid-scale battery energy storage station in the city. This marks Tesla's first large-scale energy storage installation in China and a major milestone for the company in the world's fastest-growing clean energy market.

The energy storage station, to be located in Shanghai, will be adjacent to Tesla's new Megapack manufacturing facility, which began full-scale production in February 2025. The Shanghai Megafactory, expected to supply Megapacks for the new energy storage station, has a targeted annual capacity of 10,000 Megapack units, equivalent to 40 GWh of storage.

The project aligns with China's increasing focus on renewable energy and storage infrastructure, as the country looks to manage the intermittent nature of solar and wind power while reducing carbon emissions. The energy storage station will utilise Tesla's Megapack technology, large lithium-ion battery systems designed for utility-scale energy storage. These systems store energy and discharge it to the grid during periods of peak demand, helping to stabilise power grids, prevent outages, and reduce reliance on fossil fuels.

The Shanghai Megafactory, a critical asset for Tesla’s energy division, contributes to the company's goal of expanding grid-scale battery storage solutions globally and supporting clean energy transitions with scalable and utility-grade battery systems. The facility, which saw significant growth in 2024 with a record-breaking deployment of 31.4 GWh of energy storage worldwide, also serves the rapidly expanding Chinese market, which aims to install 40 GW of battery-powered electricity capacity by the end of 2025.

Tesla's energy division experienced a substantial growth in 2024, with revenue surpassing $10 billion and gross profit rising to $2.6 billion, up from $1.1 billion in the previous year. The Shanghai energy storage station is not only a strategic move for Tesla in the competitive battery storage sector, but also a complement to Tesla's existing automotive manufacturing presence in Shanghai through Giga Shanghai.

This development is a significant step for Tesla in strengthening its position in the Chinese market, where it faces competition from domestic players like CATL and BYD. However, Tesla is also collaborating with these companies for some battery components, demonstrating a collaborative approach in the industry.

The energy storage station in Shanghai is set to be a major milestone for Tesla's energy business, contributing to China's clean energy transition and supporting the integration of intermittent renewable energy sources like wind and solar. The project was reported by Chinese financial media outlet Yicai on Friday.

1. The energy storage station, set to be located in Shanghai, will be powered by Tesla's Megapack technology, a crucial development for the renewable-energy industry as it aligns with China's increasing focus on energy storage infrastructure.
2. The Shanghai Megafactory, a significant asset for Tesla’s energy division, will finance the production of Megapack units for the new energy storage station, contributing to the finance and technology sectors in the process, and supporting China's goal of installing 40 GW of battery-powered electricity capacity by 2025.

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