US-based electric vehicle (EV) manufacturer Tesla is to build a new factory in Shanghai, China, to manufacture its megapack lithium-ion batteries.

The Austin, Texas-headquartered company says the new facility will annually produce 10,000 of the large batteries used by electricity producers and distributors to store power as part of grid networks. Each megapack battery can produce the equivalent of 40 gigawatt-hours of energy storage.

Construction of the factory is scheduled to commence in the third quarter of 2023, with operations expected to begin in the second quarter of 2024.

Tesla’s only existing megapack factory is in Lathrop, California, which also has the capacity to manufacture 10,000 units a year. The company does operate a gigafactory in Shanghai, however, which has been producing Model 3 cars since 2019 and is the company’s biggest car plant globally.

China is the largest automotive market in the world, but the growth in EV sales in China has slowed in 2023, according to GlobalData. China is also a leading market for battery storage.

Tesla announced in March 2023 that it would build a new gigafactory in Mexico, in a move seen as an attempt to near-shore its supply chain for the automotive market for the Americas.