Tesla's battery energy storage systems (BESS) in China are expected to consist of LFP lithium-ion battery cells from both CATL and BYD.

According to LatePost (via CnEVPost), BYD's FinDreams battery unit has secured a contract for more than 20% of Tesla's anticipated BESS manufacturing capacity in China. The remaining 80% of batteries will likely come from CATL.

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Lithium-ion battery leaders

When it comes to EV lithium-ion batteries, CATL and BYD are currently the two largest manufacturers globally. CATL supplies various companies, while BYD produces batteries mostly for its own needs but also for clients through its FinDreams business unit.

Tesla started construction of its BESS factory (also known as the Megafactory) in the Lingang area of Pudong, Shanghai, in May, with a plan to start production in Q1 2025. Shanghai is also the home of Tesla's Gifafactory Shanghai, which makes the Model 3 and Model Y for global markets including China and the EU.

The factory is expected to produce up to 10,000 Tesla Megapack utility-scale battery energy storage systems annually. That's up to 40 GWh of batteries. BYD's contribution—reportedly 20% of the overall output—would represent 8 GWh per year.

Tesla already has one BESS factory in Lathrop, California, which the company says will soon provide 40 GWh of annual output. In Q1 2024, the company's total battery energy storage system deployments exceeded 4 GWh.

A single Megapack container has roughly 3 megawatt-hours of capacity. Companies can order and install multiple units to achieve hundreds of MWh or even GWh-scale systems depending on their needs.

With one Megafactory in the U.S. and one in China, it's an open question when we will see a similar investment in Europe. The European market for battery energy storage systems is expanding, so a large factory in the area would be a natural development.

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