Musk: Tesla's energy storage business 'growing like wildfire'

A large-scale battery energy storage project in New South Wales, Australia, built by Tesla's Megapacks. Image: Edify Energy.

Tesla CEO Elon Musk claims that it will be “not long” before Tesla’s stationary energy storage business reaches annual shipments of 100GWh.

The electric vehicle (EV) OEM released its third-quarter 2024 financial results last Wednesday (October 23). While automotive revenue remained relatively flat, up 2% year over year, energy generation and storage revenue increased 52% from the third quarter of 2023.

Tesla reported $6.4 billion in energy revenue for the quarter, compared with less than $1.6 billion a year earlier, and $20 billion in automotive revenue in the third quarter, compared with $19.6 billion in the third quarter of 2023.

The company shipped 6.9GWh of battery energy storage systems, including its Megapack utility-scale battery energy storage system (BESS) and Powerwall residential energy storage units, during the quarter. This is about 30% lower than the previous record high of 9.4GWh in the second quarter of this year, but 75% higher than the 4GWh shipped in the third quarter of 2023.

Likewise, Tesla's second-quarter power generation and storage revenue was down about 23.7% from the second quarter, when Tesla's revenue was just over $3 billion.

While the energy segment includes solar photovoltaic installations, the contribution from that business has been declining since Tesla acquired SolarCity in 2016.

Neither Tesla’s third-quarter shareholder affidavit nor the company’s earnings call mentioned numbers for the solar business, nor did it mention its performance.

In addition to supporting Donald Trump and spending money to register Republicans to vote, Musk said on the earnings call that "the energy storage business is growing at a wildfire pace, with strong demand for both Megapack and Powerwall."

"It's very good for the energy business ... the opportunities ahead are huge," he said.

During a second-quarter earnings call in July, Tesla executives said the company’s Megapack factory in Lathrop, California, was on track to increase annual production capacity to 40GWh by the end of the year.

Musk said this goal has been achieved, with the factory now producing 200 Megapacks per week, while its Megapack factory in Shanghai, China is under construction and will be operational from the first quarter of 2025 with an annual production capacity of 20GWh.

Musk said the Shanghai factory will also ramp up production before making the 100GWh per year claim, adding, "I think it will eventually grow to multiple TWh per year."

“It has to be this way in order to have a sustainable energy future. If you don’t get to TW scale, you’re not really going to make a difference.”

The Trump-backed CEO then spoke about the importance of solar power as a major pillar of a sustainable energy future. However, at this stage, Tesla seems happy to let others fulfill that part of clean energy. How this belief in sustainable energy fits in with the agenda of his preferred presidential candidate remains to be seen.

Energy storage shipments and energy unit revenue were down compared to the second quarter, and CFO Vaibhav Taneja noted, as did executives at other major BESS manufacturers and integrators, that demand can be seasonal and volatile. Despite the decline, Tesla expects much higher sales in the fourth quarter, Taneja said.

The company expects full-year energy storage shipments to be more than double the 14.7GWh reported in 2023. In the first nine months of this year, it has already deployed a cumulative 20.4GWh.

In previous earnings calls, Musk said that energy is Tesla's most profitable business unit, with a gross margin of 30.5% in the third quarter, a company record. In the third quarter, GAAP gross margin, including automotive and service revenue, was 19.8%.

Recently, the "Battery Energy Storage Technology Bankability Report" released by PV Tech Research showed that Tesla is the only battery energy storage system supplier in the global market with an AAA rating.

This even surpasses the world’s largest cell manufacturer Contemporary Amperex Technology Co., Ltd. (CATL), which has an AA rating, and Samsung SDI, which has an A rating. Among the top 15 suppliers, China unsurprisingly dominates, according to PV Tech Research’s analysis.

The Bankability Report evaluates companies based on metrics such as cell manufacturing and module assembly capabilities, ESS solution shipments, and financial health based on the Altman Z-score.

“While Tesla relies on some third-party battery supply, quarterly deployment levels of ESS solutions are currently hitting record highs (nearly 10GWh). Furthermore, Tesla’s financial score is at the high end of all companies analysed in the first report, although the ESS business still only accounts for a small portion of the group’s total turnover,” wrote Charlotte Gisbourne, photovoltaic technology research analyst, in a blog post.

Tesla also topped Wood Mackenzie's 2023 Global Energy Storage System Integrator Ranking. Wood Mackenzie's survey results published in August this year also showed that Tesla ranked first in the North American market and second in the European market.

(Source: Tesla Global Energy Storage Network, New Energy Network Comprehensive)