On February 11th, the Tesla Shanghai Energy Storage Super Factory went into operation and the first Megapack, a super-large commercial electrochemical energy storage system, rolled off the production line. This is the second super factory built by Tesla in Shanghai Lingang and the first energy storage super factory built by Tesla outside the United States. In the field of energy storage, China has built a global-scale, complete-category and fully-equipped industrial system. What considerations were behind Tesla's decision to establish an energy storage super factory in Shanghai? And what reactions will it have on the Chinese market?
Ranked first among global system integrators
Tesla's energy storage business began as early as 2015, entering the energy storage field through household and commercial energy storage products. In 2022, Tesla established its first global energy storage super factory in California, USA. Up to now, Tesla has three major energy storage products, with its business covering over 65 countries and regions worldwide, and it has strong competitive strength in the global energy storage industry. On January 30th, Tesla released its 2024 financial report, showing that the total installed capacity of its energy storage business reached 31.353 gigawatt-hours, an increase of 114% compared to the previous year, with a gross profit margin of 26.17%, which has already outperformed its gross profit margin in the electric vehicle business. In 2024, Tesla ranked first in the global energy storage system integrators with a 15% market share.
As the main product of the Shanghai energy storage super factory, Megapack is Tesla's third-generation fixed energy storage product launched in 2019, mainly targeting large enterprises and public institutions. It is a large-scale, highly integrated energy storage solution. After the Shanghai energy storage super factory was put into production, the initial plan was to produce 10,000 Megapacks annually, with an energy storage scale of nearly 40 gigawatt-hours. For comparison, the annual production capacity of Tesla's energy storage super factory in the United States is also 40 gigawatt-hours. In 2024, the newly added installed capacity of new energy storage in China was 109.8 gigawatt-hours. The scale is considerable.
Tesla stated that the Shanghai energy storage super factory will draw on the experience of the vehicle super factory and localize as much as possible. In 2019, after the Tesla vehicle super factory was put into production and delivery, the local supply chain reached over 95% in terms of localization rate, and there were over 400 local first-tier suppliers signed in China. The commissioning of the Tesla Shanghai energy storage factory will also benefit upstream component manufacturers directly.
Relying on the geographical advantages of Shanghai, the energy storage super factory will become a global supply base and export base for Tesla. Public reports stated that Tesla has reached a cooperation with the Japanese financial services group Orix, providing products for the largest energy storage facility in Japan at present. Some market analysts speculate that the products of this order from Tesla will be dispatched from the Shanghai super factory.
Reducing costs is one of the purposes for Tesla to build the energy storage super factory in Shanghai.
In 2024, the centralized procurement price of domestic energy storage systems has entered the "0.5 yuan/Watt-hour era". In terms of price, the cost and price competitiveness of the domestic supply chain have significant advantages. "The main markets of Tesla's energy storage are concentrated in the United States, Canada, and Australia, and it began to enter the European market in a large scale in 2023. However, Australia and Europe are also the main battlefields for most Chinese energy storage enterprises. Referring to the average price of the winning bids for domestic energy storage systems, the overseas manufacturing cost of Tesla's energy storage systems is more than twice that of domestic energy storage enterprises, far higher than that of companies like Sunergy Power." Director of the Leading Energy Storage Alliance, Du Xiaotian, told China Energy News reporters, "After Tesla's super energy storage factory was established in China, its complete supply chain system will help it reduce manufacturing costs and enhance the competitiveness of its products in the global market."
At the commissioning ceremony, Mike Snyder, Vice President of Tesla Energy and Charging Business, said that the Shanghai energy storage super factory will start capacity ramp-up in the first quarter of this year and is expected to achieve at least a 50% year-on-year growth rate in the installation capacity of Tesla's energy storage products in 2025.
A research report by CITIC Securities pointed out that the overseas energy storage market is expected to boom in 2025, with global energy storage demand reaching nearly 900 gigawatt-hours, with a compound annual growth rate of 30%. The continuous increase in demand will significantly enhance the market demand for Megapack products. The rapid increase in production capacity will drive the rapid decline in product prices. Assuming that the main cost of Megapack decreases by 20% after being domesticated, if the price remains at 1.75 yuan/Watt-hour, its corresponding gross profit margin will be 41%. Even if the gross profit level remains at 30%, Megapack still has 16% of cost reduction space.
In Du Xiaotian's view, rapidly increasing production capacity must be Tesla's short-term priority choice. With the increase in production capacity and the integration of the domestic supply chain, referring to its control ability in manufacturing costs in the automotive industry, it is expected that around 2026, the production cost of Tesla's energy storage products will basically be at the same level as domestic enterprises.