Tesla to build Shanghai factory to make Megapack batteries
Tesla’s electric semi truck is unveiled during a presentation in Hawthorne, California, US. Reuters
Elon Musk’s automaker will break ground on the plant in the third quarter and start production in the second quarter of 2024, Xinhua reported from a signing ceremony in Shanghai.
Complementing a huge existing Shanghai plant making electric vehicles, the new factory will initially produce 10,000 Megapack units a year, equal to around 40 gigawatt hours of energy storage, to be sold globally, Xinhua said.
With the new Shanghai plant, Tesla will take advantage of China’s world leading battery supply chain to ramp up output and lower costs of its Megapack lithium-ion battery units to meet rising demand of energy storage globally as the world shifts to use more renewable energy.
Tesla generates most of its money from its electric car business, but Musk has committed to grow its solar energy and battery business to roughly the same size.
Chinese battery giant CATL has also been deepening its collaborations with clients including Tesla in energy storage battery supplies, which its Chairman Robin Zeng expected to have a larger market than batteries powering electric vehicles (EV).
Tesla currently has a Megafactory in Lathrop, California, capable of manufacturing 10,000 Megapacks per year.
The company began producing Model 3 cars in Shanghai in 2019 and now is capable of producing 22,000 units of cars per week.
Tesla planned to expand the Gigafactory Shanghai, its most productive automaking plant, to add an annual capacity of 450,000 units, Reuters reported last May.
The US company, however, had grappled with rising inventory in Shanghai as demand started weakening in the third quarter, leading to aggressive price cuts in its major markets globally in January.
EV sales growth in China, the world’s largest auto market, has slowed to 20.8% in the first two months of 2023, from 150% in the same period a year ago.
In the wake of the latest US banking meltdown, small lenders might appear vulnerable to an exodus of depositors fleeing for larger banks.
US banking rules guarantee deposits of up to $250,000, meaning that customers with larger holdings face losses if the bank goes under.
The implications of this rule became painfully clear with the collapse of Silicon Valley Bank in early March after it suffered a run from customers with holdings exceeding the $250,000 Federal Deposit Insurance Corporation (FDIC) threshold.
Federal data shows that some depositors at small banks did head for the exits, moving some $120 billion in a single week into larger banks sometimes viewed as too big to fail.
But minnows like Leader Bank of Massachusetts and Heritage Bank of Minnesota also have a solution to the issue that enables them to pitch themselves as safe options for those seeking to safeguard sums well beyond the $250,000 FDIC limit.
Leader Bank can guarantee up to $100 million in deposits from individuals through a technology platform run by fintech company IntraFi, that essentially helps to distribute the funds among a network of large and small banks.
This system of reciprocal deposits -- which has been getting more attention since the SVB collapse -- allows banks to accept large deposits well beyond $250,000 while still guaranteeing clients they will be federally insured.
The program appealed to Jennifer Klepper, a cofounder of the startup Early Works, who began looking at different cash management options last fall.
The goal was to take advantage of higher interest rates, while making sure the money was federally insured.
“We considered putting $250,000 in each bank,” said Klepper.
But that option was an “accounting nightmare,” leading Klepper to a program offered by Heritage Bank.
The IntraFi venture and similar offerings from American Deposit Management and Wintrust, though compliant with US law, have not escaped criticism.
Former FDIC Chair Sheila Bair has accused the ventures of “just gaming the FDIC rules,” arguing it adds moral hazard.
The FDIC “takes all the credit risk,” resulting in “much bigger costs to the FDIC,” she said.
But Jay Tuli, president of Leader Bank, counters that the program mitigates risk “because it spreads the concentration of large depositors among many banks, not just a select few.”
Further, such reciprocal deposit programs “can help reduce the risk of bank runs because insured depositors have no reason to participate in bank runs, much less start them,” said Tom Geiger, chief executive of Heritage Bank.
Since SVB failed, there has been discussion in Washington of raising the $250,000 FDIC limit, but no consensus has emerged thus far.
