Shanghai luminaries have expressed hopes that Tesla's Megapack energy storage plant in Shanghai, for which the US electric carmaker broke ground at the Lin-gang Special Area on Thursday, will serve as an icon for the region's enterprises and help foster an industrial cluster centered around energy storage.

Tesla's Megapack plant will be the first such facility outside the United States that will entail an investment of 1.45 billion yuan ($200 million).

Covering some 200,000 square meters, the new energy storage project is expected to enter mass production in the first quarter of 2025. This will supplement Tesla's California-based Megapack factory, which has an annual capacity of 10,000 units.

The Lin-gang plant is set to produce 10,000 Megapack units — advanced battery systems designed for large-scale energy projects — annually, which translates to nearly 40 gigawatt-hours of energy storage capacity.

Each Megapack can store more than 3 megawatt-hours. The annual output can provide essential energy storage and grid support. Tesla's energy storage products are currently used in over 60 countries and regions.

The new plant received construction permit on May 13. From negotiation to reaching an agreement between Tesla and Lingang, the whole process took just one month, said Wu Xiaohua, deputy-secretary of the Party working committee of the Lingang Special Area, during the groundbreaking ceremony.

"It is our hope that Tesla's new mega factory will serve as an icon, helping Lin-gang to grow into a hub for world-leading companies, an internationally influential highland for industrial innovation and a demonstration zone for green transformation and low-carbon development," said Wu.

Lauding China's efforts in developing the new-energy industry, including the energy storage sector, Tesla's vice-president Tao Lin said the country boasts complete industrial chains, vast market potential, and a production and business environment crucial for the growth of various enterprises.

Tesla's gigafactory in Lin-gang, which started operations at the end of 2019, involved an initial investment of over 50 billion yuan. The facility now is able to produce over 950,000 new-energy vehicles every year.

The State-owned commercial conglomerate Lingang Group reached an agreement with Tesla on Thursday to make use of the latter's Megapack system, which will be the first batch of ultralarge electrochemical commercial energy storage systems to be introduced in China.

Gong Wei, vice-president of Lingang Group, said the Megapacks will be used for energy storage at a data center in the Lingang Special Area, which was included in China (Shanghai) Pilot Free Trade Zone in 2019. Purchase of Megapack units will help Lin-gang to achieve net-zero goals, he said.

"With Tesla's benchmark project, we anticipate that within the next three to five years, an industrial cluster centered around energy storage will rapidly emerge. It will help elevate the resilience and stability of the local industries," said Lu Yu, head of the high-tech department of the Lin-gang Special Area Administration.

Thanks to the rising demand and expanded application scenarios, the world's energy storage market size is estimated at $51.1 billion in 2024, and expected to reach $99.72 billion by 2029, growing at a compound annual growth rate of 14.31 percent during the forecast period, according to market consultancy Mordor Intelligence.

Data from market tracker Wind Info showed that more than 80 percent of the A-share energy storage companies achieved profitability in the first quarter of this year, overtaking the 75.85 percent profitability rate on average in the A-share market during the same period.