Tesla lands tax abatement for Texas Megapack factory

After starting production at its Shanghai energy storage factory last month, Tesla is now set to deliver another BESS manufacturing facility on the home soil.

Waller County, Texas, approved on Wednesday a tax deal for the manufacturer to build and operate its Megapack factory in an industrial park owned by Real Property Improvements. Tesla already held the lease on the 1-million-sq-ft building by a third party, logistics company DB Schenker.

The tax abatement covers two phases. The first one includes improvements to the manufacturing facility amounting to $44 million, such as grid connection capacity and HVAC. It also includes the installation of Megapack manufacturing equipment to the tune of $150 million.

The next phase of the deal involves a new $31 million distribution facility and Tesla’s investment of about $2 million in distribution equipment and building upgrades.

However, the tax abatement is conditional on an agreement with the City of Brookfield. If approved, the Texas factory is expected to employ 1,500 workers by its third year of operation.

The news doesn’t come out of the blue. In late January, CEO Elon Musk confirmed on the company’s Q4 2024 Earnings Call that Tesla was already building its third Megapack plant, but did not disclose the location.

“Energy storage is a big deal and will become incredibly important in the future,” Musk said. “We’re trying to ramp the output of the stationary battery storage as quickly as possible.”

Tesla’s latest financial results highlighted the growing importance of its energy storage business. In 2024, the company deployed 31.4 GWh of battery storage systems, generating a record $10.86 billion in revenue, up 67% year-on-year. In contrast, Tesla’s automotive revenue declined by 6%, and net profit plummeted by 53%.

Even in terms of profitability, the energy storage division posted a gross margin of 26.17%, far exceeding the 17.9% margin for Tesla’s vehicle business, reinforcing storage as Tesla’s next major growth driver.

The Texas factory would be Tesla’s third large-scale BESS manufacturing plant and the second one in the U.S. Its factory in Lathrop, California, can produce 10,000 Megapack units every year, equaling 40 GWh of energy storage. 

Tesla also produces its energy storage products at the Gigafactory Nevada, specifically its Powerwall stationary home battery, alongside electric motors and vehicle powertrains.

Tesla’s Shiv Mysore said at the meeting with county officials that the new facility will be a “replication” of Tesla’s Lathrop factory.