SHANGHAI - US carmaker Tesla's new Megafactory in Shanghai, dedicated to manufacturing energy-storage batteries known as Megapacks, launched production on Tuesday, marking a significant expansion of the company's presence in China.

The new Megafactory, hailed by the company as a "milestone," is its second major facility in Shanghai and the first of its kind outside the United States, showcasing the company's deepening investment in China amid the global challenges of unilateralism and trade protectionism.

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Tesla's move highlights the importance of economic cooperation between the two countries, countering protectionist rhetoric and underscoring the risks of decoupling for US industries, said Wu Xinbo, dean of the Institute of International Studies at Fudan University.

Megafactory effect

With an initial annual production capacity of 10,000 units, equivalent to roughly 40 gigawatt-hours of energy storage, this Megafactory is set to significantly contribute to Tesla's global energy storage goals. The company anticipates a year-on-year increase of at least 50 percent in energy storage deployments in 2025.

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Notably, mass production at the factory commenced just eight months after construction began, serving as a new example of "Tesla speed" in China, with the Shanghai Gigafactory, Tesla's first plant in the country's eastern financial hub, having been built and inaugurated within a year in 2019.

"We've witnessed the incredible speed of Shanghai and Tesla once again. I'm excited to have this factory kick off an exciting year for Tesla," said Mike Snyder, vice-president of Tesla, at the launch ceremony on Tuesday, expressing confidence that the new factory will become a cornerstone of Tesla's global production network.

The US company already has a Megapacks factory in California, which has an annual capacity of 10,000 units.

Covering an area of approximately 200,000 square meters, the new Shanghai plant represents a total investment of about 1.45 billion yuan (around $202 million), according to the administration of the Lin-gang Special Area of China (Shanghai) Pilot Free Trade Zone, where this Tesla facility is located.

Since Tesla's Shanghai Gigafactory began operations in 2019, Lin-gang has evolved into a world-class automotive and energy center, home to over 160 upstream and downstream enterprises. These companies form a complete supply chain, spanning smart hardware, core software, vehicle manufacturing and services.

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Tesla's presence has helped Lin-gang develop a world-class automotive industry, with the company's rapid development model serving as a blueprint for other projects, said Lu Yu, an official of the Lin-gang Special Area administration.

Lauding China's efforts to develop the new energy industry, including the energy storage sector, Tesla vice-president Tao Lin told Xinhua in May last year that the country offers a complete industrial chain, vast market potential, and a production and business environment crucial for enterprise growth.

"I believe the new plant is a milestone for both Shanghai and Tesla," Tao added.

Why China

Tesla is one of the most popular brands in China, the world's leading new energy vehicle (NEV) market. About two-thirds of vehicles produced by the Shanghai Gigafactory are sold in China, and one-third are exported to overseas markets such as Europe. Megapacks produced in Shanghai will also supply the global market.

As Tesla scales up production at the Megafactory, it will be able to expand shipments to more countries in Europe and Australia, Snyder said in an exclusive interview with Xinhua.

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In the fourth quarter of 2024, Tesla achieved record-breaking deliveries in the Chinese market, with the Model Y remaining the best-selling vehicle of the year. The New Model Y made its global debut in China in January this year, and has since been launched in all markets.

"Tesla's decision on the Megafactory shows US companies' confidence in the Chinese market and China's manufacturing capabilities. It reflects a willingness among American firms to engage in deeper cooperation with China," said Wu Qisheng, a researcher at the Shanghai Academy of Social Sciences.

Indeed, China's NEV industry has seen remarkable growth in recent years driven by robust domestic demand amid the country's green transition drive. In 2024, China's NEV output exceeded 10 million units for the first time. Tesla was a major contributor to this landmark achievement.

The Megafactory project shows that the United States and China can find common ground in the global supply chain, avoiding decoupling and fostering mutually beneficial collaboration, Wu Qisheng noted.

Tesla CEO Elon Musk also expressed in January that Tesla is ready to deepen investment in and cooperation with China, and play a positive role in promoting US-China economic and trade interactions.

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More international players are tapping into the promising Chinese market. According to data from China's Ministry of Commerce, 59,080 new foreign-invested firms were established across China in 2024, an increase of 9.9 percent year on year.

On Monday, a State Council executive meeting approved an action plan to stabilize foreign investment in 2025, showing the country's unwavering commitment to opening up and sharing development benefits with others.

The meeting noted that foreign enterprises play an important role in job creation, export stabilization and industrial upgrading, and urged more practical, effective measures to stabilize existing foreign investment and expand new investment.

Beyond business move

As Tesla continues to expand its footprint in China, the new Megafactory not only represents a strategic business move but is also a testament to the potential cooperation between the world's two largest economies in the quest for a sustainable future.

"Tesla is not just an electric vehicle company. We're building a world powered by energy generation and storage products and transported by electric vehicles to accelerate the world's transition to sustainable energy," said Snyder.

Global energy transition giants like Tesla are looking to explore market opportunities in China as the country has been accelerating the energy transition to meet the dual carbon goals of peaking carbon emissions by 2030 and attaining carbon neutrality by 2060.

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"We plan to be a major contributor to China's green transformation," the Tesla executive added.

As a global renewables powerhouse, China is a major market for energy storage. The newly installed capacity of renewable energy in 2024 accounted for 86 percent of China's total newly installed power capacity, while the cumulative installed capacity of renewable energy made up a record high of 56 percent of the nation's total, data from the National Energy Administration showed.

Tesla's energy storage technology has already achieved a high level of commercialization and market success in the United States, said Liu Qing, vice-president of the China Institute of International Studies.

"There remains room for market-driven cooperation between China and the United States in addressing climate challenges, particularly in advancing energy storage and energy-saving technologies," Liu added.