Tesla applies to expand Shanghai plant, add pouch battery cell output

(Reuters) – Tesla (NASDAQ:) Inc has applied for regulatory clearance to expand its Shanghai plant and to begin producing for the first time pouch-type battery cells, albeit in small numbers.

An undated public notice said the potential expansion would give the Shanghai Gigafactory the capacity to produce 1.75 million powertrain units annually, up from 1.25 million currently.

It was not clear from the notice, posted on the website of the district where the factory is located, whether Tesla is committed to moving ahead with the expansion or is only seeking approval for potential, future capacity.

Tesla did not respond to a request for comment.

The automaker is also looking for clearance to produce pouch-type battery cells, the notice said, adding that a trial production line would have initial annual capacity to make 20,000-amp-hours of cells, equivalent to the power in a single Model Y battery pack.

It was not clear how Tesla would use the pouch cells, which it has not previously used in its electric vehicles.

Pouch cells, widely used in consumer electronics, differ from the cells Tesla has used for EVs in that the battery components are housed in a more flexible metal bag rather than a rigid cylinder. They are used by some automakers including General Motors (NYSE:).

Tesla is also looking to set up new facilities to recycle chemicals for waste-water treatment in the plant.

The notice, part of a standard procedure for environmental clearance in China, said Tesla is seeking public comment on the environmental impact of the potential expansion through Wednesday.

Tesla’s Shanghai plant, its largest worldwide, produced about 726,000 Model 3 and Model Y vehicles in 2022, more than half of the automaker’s global sales.

Tesla is also seeking to ramp up production of cylindrical, 4680 battery cells in China and has brought in new suppliers to cut costs, Reuters has reported.

Chief Executive Elon Musk has said he would prefer to have a surplus of battery cells that could be directed to the company’s power-storage business rather than a shortage, because running short would mean “the factories stall”.

Tesla also said last month it would open a Shanghai factory to produce its commercial energy storage units known as Megapacks, which can be used to store power from renewable sources like solar.

Each Megapack costs about $1.9 million before installation.