Tesla is reportedly considering resuming the third phase of its Shanghai plant project, with a potential focus on producing its future $25,000 model, as per a report from local media outlet LatePost. The company had initiated preparations for the Giga Shanghai phase three factory in 2021 but halted the progress midway through last year.
If the project moves forward, it could center on Tesla’s anticipated $25,000-priced model, a key component of the company’s ambitious goal to achieve 20 million annual sales by 2030, the report stated. The Shanghai plant, renowned for its efficiency, could further enhance Tesla’s overall production capacity.
Tesla’s Shanghai factory presently boasts a capacity of over 950,000 vehicles per year, making it the company’s largest production center globally, according to the third-quarter financial report released in October. The phase three project, if realized, was initially part of Tesla’s plan to double the total production capacity of the Shanghai plant to 2 million vehicles annually, according to earlier reports.
The potential restart of the third phase comes amid a broader challenge for Tesla, where it faces not a lack of production capacity but a demand slowdown. The report highlighted a decline in Tesla’s share of the US electric vehicle market from 62% in the first quarter to below 50% in the third quarter.
In the highly competitive Chinese market, Tesla’s Model 3 and Model Y, which are several years old, are reportedly facing increased competition from rivals like BYD, Aito, and Xpeng. The report also noted that Tesla’s energy storage battery products, set to commence production in Shanghai next year, will be introduced in the Chinese market, marking a strategic expansion for the company.
Tesla had earlier signed a deal with Shanghai’s Lingang authorities to construct a Megafactory dedicated to producing energy storage product Megapack. The Megafactory, slated to begin construction in the third quarter of the year and enter production in the second quarter of 2024, is Tesla’s first energy storage system factory outside the US domestic market.
The planned energy storage products for China are expected to contribute to Tesla’s revenue and profit expansion. The report stated that Tesla’s energy storage business, currently serving the US market, generated $1.56 billion in revenue in the third quarter, constituting 7% of total revenue.
Tesla is said to have hired key personnel for the Megafactory, including a head of research and development, and is actively recruiting for a head of sales. Initial plans suggest the Megafactory will source batteries from CATL, with potential plans to transition to in-house battery production in the future, according to industry speculation cited in the report.
