EconoScope | Will Tesla's megafactory boost China's energy storage industry?

(ECNS) -- The inauguration ceremony for U.S. carmaker Tesla's Shanghai energy storage megafactory was held on Tuesday. As a multinational company that initially built its business empire through electric vehicle (EV) manufacturing, will Tesla strike gold in China with its energy storage venture? And what impact will this move have on the country’s energy storage industry?

Professor Tan Hongwei from the School of Mechanical and Energy Engineering at Tongji University believes that Tesla's energy storage business is unlikely to have the same disruptive growth as its EVs did when entering the Chinese market.

“China’s energy storage industry is already well-developed, with massive market-driven demand, certain technological advantages, and a well-planned national strategy.” he noted.

Tan pointed out that the energy storage market scales proportionally with the growth of renewable energy generation.

Currently, energy storage accounts for about 2 percent to 5 percent of China’s renewable energy generation. In the future, due to declining battery costs, this proportion is expected to expand from 5 percent to 20 percent.

China's special envoy for climate change Liu Zhenmin pointed out that by the end of September 2024, renewable energy installations in China accounted for approximately 54.7 percent of the total installed capacity.

While renewable energy has maintained rapid growth in recent years, it still cannot fully meet domestic energy supply and demand. According to forecasts from China’s energy department, to achieve carbon neutrality, China’s renewable energy capacity needs to reach around 80 percent by 2050.

In addition to the large market potential, China's policies have signaled strong support for energy storage companies.

In December 2024, Shanghai issued a policy outlining plans to establish a new industrial chain of energy storage by 2026. The goal is to create two new energy storage industrial parks and achieve an application scale of over 800,000 kilowatts, with initial success in peak-shaving energy storage.

Why did Tesla choose China for its first energy storage megafactory outside the U.S.? Wu Xiaohua, deputy secretary of the Party working committee of Lin-gang Special Area in Shanghai, stated that Tesla’s energy storage products have already been implemented in Lingang, such as in the digital center’s general power systems and public charging facilities.

Wu further emphasized that Lingang would provide essential support for Tesla’s product exports, including customs clearance, financial services, and legal assistance.

“We sincerely hope that Tesla’s energy storage products, like Tesla cars, will expand from Lingang to across China, and eventually, the world,” he said.

Tesla’s energy storage business has become an increasingly significant segment for the company. According to Tesla’s 2024 financial report, the company added over 10,000 new superchargers last year, expanding its network by 19 percent year-on-year. Meanwhile, its energy storage deployments reached 31.353 GWh in 2024, up 114 percent year-on-year, with a gross margin of 26.17 percent to surpas that of its EV division.

With growing demand for energy storage products, Tesla’s large-scale commercial battery storage systems have faced supply constraints. Against this backdrop, the Shanghai energy storage megafactory was established, completing the entire process from start to production in just nine months. The facility is set to ramp up production starting in the first quarter of this year.

Tesla is primarily boosting investor confidence through its energy storage product ecosystem, said Zhang Yu, a senior expert at State Grid Shanghai Municipal Electric Power Company. Zhang said that from this perspective, the launch of the energy storage megafactory will accelerate the development of China’s energy storage industry.

Zhang noted that Tesla’s cost advantage, derived from its large-scale production and advanced manufacturing processes, may put pressure on leading domestic energy storage companies.

However, he believes the industry will experience a dynamic of competition and mutual learning rather than one company replacing another.