Tesla is making a major shift. Once known only for its electric cars, it now wants to stand out in another sector: energy storage. This comes just as its car sales are slowing down and Elon Musk's image faces criticism, with the focus on Asia, especially on China.
A key contract in China for Tesla Energy
Tesla has just closed a deal worth more than 4 billion yuan (about $557 million) with the Chinese government. The plan is to build the country's largest backup battery. This facility will use Megapack technology, a large-scale electric storage system developed by Tesla.
The battery will have a capacity exceeding 1 GWh (1,000 MWh), enough to store renewable energy and release it when needed. China already gets nearly 40% of its energy from renewable sources like solar and wind, and it wants to ensure this energy is stable and reliable.
How Tesla helps prevent blackouts
Renewable energies have a problem: their production isn't constant. The sun doesn't always shine and the wind doesn't always blow. That can cause power outages if there's no system to store electricity.
This is where Megapack batteries come in. During periods of high production, they store energy and when demand rises or generation drops, they release it. This prevents blackouts and guarantees a stable supply, something that concerns countries that increasingly depend on these sources.
The plant will be located in Shanghai and will use 3.9 MWh (3,900 kWh) modules. It can supply 1 MW (1,000 kW) for four hours, enough for thousands of homes or medium-sized industries in emergencies.
Tesla Energy, a fast-growing business
This project in China isn't an isolated case. Since February 2025, Tesla has produced Megapacks in a new factory within the country. They have already manufactured more than 100 units for different projects, both local and international.
This division of Tesla is gaining importance. Although it doesn't dominate the market, this contract in China strengthens its global presence.
The challenge in the United States
While Tesla grows in Asia, in the United States the situation is more complicated. The recent tax reform pushed by Donald Trump cut subsidies for electric cars, a direct blow to Tesla.
In addition, Elon Musk has accumulated public controversies that have affected the brand's image, especially among more progressive and environmentally conscious sectors. This has led Tesla to seek diversification and to make a strong bet on energy storage.
This move toward the battery business is a smart strategy. It's a growing market, with government support, and it offers more stable income. For Tesla, it's a way not to depend solely on car sales and to prepare for a more complex energy future.