A news has come out on the soil of China, which has breathed new life into the ongoing debates about the future of energy. Imagine, Tesla, which has made a splash in the world of electric vehicles, has now reached an agreement to build the largest grid-scale battery power plant ever in China. This is not a small thing, especially when the trade relationship between the US and China is going a little tense these days.
Tesla itself confirmed the deal on Chinese social media service Weibo. When the ambitious plant is ready, it will be the largest energy storage facility of its kind in China, he said. Tesla's Shanghai battery factory has produced more than 100 Megapacks in the first quarter of 2025.
The deal is worth 4 billion yuan (which is equivalent to about $556 million), which Tesla has signed together with Shanghai's local government and financing firm China Kangfu International Leasing.
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Now you must be wondering what are these Megapacks? Basically, these are such large battery systems that are designed for the electricity grid. Their main task is to maintain a balance between supply and demand of electricity. Imagine, when there is no sun or wind, it becomes difficult to get electricity from solar and wind energy. In such a situation, these Megapacks help in meeting that shortage.
Tesla has beautifully explained in its Weibo post that these grid-side energy storage power stations will act as a 'smart regulator' for the city's electricity. They will ensure safe, stable and efficient power supply in the city by reducing the pressure on the city's power supply.
But this deal is no flower sage for Tesla. Already in China there are such giants as CATL and BYD, which make similar energy storage products. These Chinese companies have made tremendous progress in the development and production of batteries. You will be surprised to know that CATL has about 40% share in the global market. So, Tesla is going to get a tough fight here.
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Interestingly, the battery cells and packs used in Tesla's Megapacks were expected to be supplied from CATL itself. Not only this, Tesla CEO Elon Musk's relationship with former US President Donald Trump during the initial trade war also makes this business a bit tricky, especially when the relationship between the US and China is tense.
Still, the demand for grid-scale battery installations in China is skyrocketing. In May last year, Beijing set a new target of adding about 5 gigawatts of battery-powered power supply by the end of 2025, bringing their total capacity to 40 gigawatts.
And it's not just China. Tesla is also exporting Megapacks from its Shanghai factory to Europe and Asia to meet the growing demand around the world. According to the International Energy Agency, the capacity of global battery energy storage systems increased by a record 42 GWh in 2023, almost double the total capacity increase last year.
All of this tells us how rapidly the need for large battery storage systems is growing around the world. Tesla's project in China is a huge and decisive step towards meeting the country's growing energy needs and strengthening the electricity grid. Now it remains to be seen what new colors this deal fills in China's energy landscape and how much it proves to be beneficial for Tesla.
Source: CNBC
