Tesla has opened a $200 million Megapack battery factory in Shanghai, reinforcing its presence in China despite rising trade tensions between the U.S. and Beijing. The new facility, located near Tesla’s Gigafactory, marks a significant step in the company’s expansion as CEO Elon Musk balances his role in both the U.S. government and the ongoing trade conflict with China.

While Musk was absent from the factory opening, focusing on his work with President Donald Trump on reshaping the federal government, the new plant signals his unique position in navigating escalating U.S.-China economic tensions.

“Elon Musk thrives in the edge of uncertainty. He believes innovation will keep him in good standing in China, even amid turbulent times,” said Michael Dunne, a consultant in China’s auto industry. Musk’s strategy is clear: innovate faster than anyone else and remain influential in China.

The factory’s opening comes as China retaliates against U.S. trade policies, implementing tariffs on U.S. goods like coal and liquefied natural gas. Beijing has also taken steps against American tech giants, launching antitrust investigations into companies like Google and Nvidia.

Tesla’s Megapack batteries, produced in this new facility, will help utilities manage energy demand and provide power during peak times or blackouts. One Megapack can store enough energy to power 3,600 homes for an hour. This factory is Tesla’s first Megapack production site outside the U.S., with an annual output of 10,000 units. Tesla’s California plant produces a similar number of units.

China’s dominance in the global battery industry makes it a strategic location for Tesla. “China leads the world in battery manufacturing. There is no better place for Tesla to build these products,” said Dunne.

Tesla has already established a strong foothold in China’s car market. Its Shanghai Gigafactory, which opened in 2019, is a key player in both the Chinese and global markets. Despite this, local competitors like BYD are gaining ground, surpassing Tesla in EV production in 2024.

Tesla’s factory opening in Shanghai has received positive media attention. State-run outlets like The Paper praised the event as a reflection of both “Tesla speed” and “Shanghai speed,” highlighting the rapid pace of the factory’s construction and its potential impact on the local supply chain.

Tesla’s continued success in China is closely tied to its ability to navigate U.S.-China relations. Despite trade tensions, Tesla remains a respected and positive brand in China, with Musk enjoying widespread admiration. During a visit to Beijing in April, Chinese Premier Li Qiang praised Tesla’s success in China as a “successful example of Sino-U.S. economic and trade cooperation.”

Musk’s influence extends beyond business. Some Chinese experts hope he could play a role in improving U.S.-China relations. While Musk advocates for cooperation between the two countries, his influence may be limited by the hardline stance of many in the Trump administration.

As the trade war intensifies, Tesla’s ability to maintain its operations in China will depend on its ability to innovate and navigate the changing political landscape.