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Is Tesla’s energy business finally boosting the stock?

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Tesla’s stock (TSLA) is surging right now, and a significant contributor to that surge could arguably be its energy business.

Tesla has been in the energy business for almost a decade at this point.

It launched its Powerwall and Powerpacks in 2015. Shortly after, it merged with SolarCity going into the solar business.

There have been ups and downs with its energy business since then.

Solar deployment has decreased since Tesla acquired SolarCity, but the energy storage business has consistently increased over the last decade, especially since Tesla launched the Megapack.

But despite this consistent increase, energy has remained a small part of Tesla’s overall revenue, which still mostly comes from its automotive business:

$ in millions Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 YoY
Total automotive revenues 19,963 21,268 19,625 21,563 17,378 -13%
Energy generation and storage revenue 1,529 1,509 1,559 1,438 1,635 7%
Services and other revenue 1,837 2,150 2,166 2,166 2,288 25%
Storage deployed (MWh) 3,889 3,653 3,980 3,202 4,053 4%

However, as you can see above, Tesla’s energy grew last quarter year-over-year while its auto business didn’t.

But that’s nothing compared to what happened this quarter.

Tesla hasn’t released its financial results yet, but it did disclose production and delivery numbers yesterday.

Vehicle deliveries are again down year-over-year, yet Tesla’s stock surged 15% since the news was released.

The big surprise with the delivery results is that Tesla announced that it deployed 9.4 GWh of energy storage in Q2:

We deployed 9.4 GWh of energy storage products in Q2, the highest quarterly deployment yet.

That’s more, and significantly more, than twice the capacity deployed in Q1, which itself was a record capacity at 4 GWh.

Considering that Tesla brings in about $400 million in revenue for every 1 GWh of energy storage it deploys, we can expect Tesla’s energy business to bring about $3.7 billion in revenue in Q2.

That’s more than twice as much as last quarter, and Tesla’s energy revenue should now surpass its services and other revenue.

Electrek’s Take

That’s a massive quarter-over-quarter increase. Tesla has been ramping up production at its Megafactory in California. I am sure that this ramp-up is contributing to the increased deployment last quarter, but the increase is so massive that I have to think that Tesla had some backlog of large projects that officially went online in Q2.

Tesla accounts for deployment once projects are commissioned, and there are a lot of factors that can affect that timing. Sometimes, it pushes deployment to another quarter.

Regardless, the new record deployment is getting to a level where the market has to take it seriously.

We are talking about a $15 billion annual business that is growing at an impressive pace. Tesla, unfortunately, doesn’t break down margins on its energy business, but it did reveal that it is achieving positive and growing gross margins.

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