Tesla Inc. will build a factory in Shanghai to produce Megapack energy storage devices, Chinese state media Xinhua announced on Sunday.

Elon Musk’s carmaker will begin construction of the plant in the third quarter and begin production in the second quarter of 2024, Xinhua reported from a signing ceremony in Shanghai.

Complementing the huge existing factory in Shanghai, which produces electric vehicles, the new plant will initially produce 10,000 Megapack units per year, equivalent to about 40 gigawatt-hours of energy storage, to be sold worldwide, Xinhua reported.

With the new factory in Shanghai, Tesla will take advantage of China’s world-leading battery supply chain to increase production and lower costs of its Megapack lithium-ion batteries to meet growing demand for energy storage worldwide as the world transitions to renewable energy. energy, reports Reuters.

Tesla makes most of its money from its electric car business, but Musk has promised to grow its solar and battery businesses to about the same size.

Chinese battery giant CATL has also deepened cooperation with customers including Tesla to supply energy storage batteries, for which its chairman Robin Zen expects a bigger market than the batteries that power electric vehicles (EVs).

Tesla currently has a mega-factory in Lathrop, California, capable of producing 10,000 megapacks per year.

The company began production of Model 3 cars in Shanghai in 2019 and is now capable of producing 22,000 cars per week.

Tesla planned to expand the Shanghai Gigafactory, its most productive car factory, to increase annual capacity by 450,000 units, Reuters reported last May.

However, the US company struggled to build inventories in Shanghai as demand began to weaken in the third quarter, leading to aggressive price cuts in key global markets in January.

Growth in electric car sales in China, the world’s largest car market, slowed to 20.8% in the first two months of 2023 from 150% in the same period last year.