Known primarily for its electric vehicles, Tesla Inc. on April 19 reported the biggest surge yet in its energy storage business — a business that could one day rival its EV volumes, executives said.
"Our energy storage deployment reached nearly 4 GWh in [the first quarter of 2023]. This is, by far, the strongest quarter ever," Tesla CEO Elon Musk said on an earnings call. Tesla's stationary storage growth "will significantly exceed the vehicle growth" and will become "bigger than auto from the standpoint of total gigawatt hours deployed," Musk added.
The executive did not say when Tesla's battery business would cross that GWh threshold, however.
"If you just look at ... what's needed to transition the world to a sustainable energy economy, there is more stationary energy storage needed than there is mobile energy storage," Musk said.
In the first three months of this year, Tesla's energy storage additions totaled 3,889 MWh, up 360% from a year ago and 58% more than the 2,462 MWh the company deployed in the fourth quarter of 2022.
Musk attributed the growth to the ongoing ramp-up of a factory for its utility-scale Megapacks in Lathrop, Calif.
"There's still some way to go to reach the full run rate of 40 GWh per year," the CEO said. The factory will be "the first of many," including a recently announced 40 GWh plant in Shanghai, China, Tesla said in an April 19 8-K filing to the SEC. Construction on the Shanghai factory is scheduled to start later this year.
"We are also making progress on storage profitability, generating our highest gross profit yet in the quarter," added Tesla CFO Zack Kirkhorn on the call.
Although the business remains a small portion of Tesla's overall revenues, its growth is becoming significant enough for Tesla to announce that it would begin including more detailed guidance on energy storage.
"I think it will be a few more quarters before we get there," Kirkhorn said.
Solar 'impacted by supply chain challenges'
Tesla's accelerating energy storage growth in the first quarter is in line with expectations for an industrywide jump in US battery installations in 2023, driven partly by new and expanded tax incentives in the Inflation Reduction Act.
Overall, Tesla reported energy generation and storage revenues in the first quarter of $1.53 billion, up from $616 million a year ago and $1.31 billion in the fourth quarter of 2022.
Tesla deployed 67 MW of solar capacity in the quarter, up 40% year over year but down from 100 MW in 2022's fourth quarter. The quarter-over-quarter drop was due to "volatile weather and other factors," the company said in its 8-K filing. "In addition, the solar industry has been impacted by supply chain challenges."
The company's total revenues jumped 24% in this year's first quarter to $23.33 billion from a year ago, slightly missing the S&P Capital IQ consensus estimate. Tesla posted non-GAAP net income attributable to common stockholders of $2.93 billion, or 85 cents per share, in the first quarter. That was down 22% from $3.74 billion, or $1.07 per share, in the first quarter of 2022, but on par with the Capital IQ consensus estimate.
For 2023, Tesla said it expects to exceed its annual growth rate target of 50% for EV production, with around 1.8 million cars. On the profit front, "We continue to believe that our operating margin will remain among the highest in the industry," the company said in its 8-K.
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