Tesla’s energy storage and solar business brings in $810 million Finally, revenue exceeds costs

Tesla’s main source of income is from sales of electric cars, however its most recent quarterly earnings report revealed growth in the company’s energy storage and solar businesses.

According to Tesla CEO Elon Musk, the demand picture for this division will be even brighter if it can get enough chips for its energy storage products.

Tesla reported Monday $801 million revenue from its energy storage and generation business. This includes its three main products, solar, Powerwall for home and businesses and Megapack, which is a fraction of its total revenue of nearly $12 billion. Despite being small, this division sells more solar and energy storage. This division saw a 62% increase in revenue compared to the prior quarter, and a more impressive 116% growth compared with the quarter ending in 2020. Tesla does not separate its solar and energy storage revenues.

Importantly, its cost-of-revenue for solar and energy storage was $781million, which means that the total cost to produce and distribute these storage products for revenue was for the first ever lower than their revenue. This is good news.

The total number of deployments rose, as one would expect. Tesla added 1,274 megawatt hours of storage energy in the second quarter 2021. This is a 20% increase over the previous year. The amount of solar energy used in this quarter was also 85 MWh. This is a 214% increase over Q2 2020. Side note: Tesla’s solar and storage installations were flat in Q2 2019, compared to Q2 2020. This is likely due the general slowdown of businesses following the pandemic.

Revenue growth is the key nugget. Tesla generated $369 million from storage and solar in 2019, a total of $369 millions. In Q2 2020 revenue was flat at $369 million. The quarter’s revenue was nearly double that of Tesla in the first quarters 2019 and 2020.

Was there any change? Tesla cites several Megapack projects that are now online, and their growing popularity for its combination solar-powerwall product. Tesla no longer permits customers to purchase Powerwall products without installing solar panels. A configurator at Tesla’s website shows that a Megapack costs about $1.2million before taxes. Tesla claims that the first deliveries of Megapacks will take place in some states by 2023.

However, Tesla’s energy storage business faces headwinds. Musk stated that both demand and supply for the Megapack as well as the Powerwall are exceeding each other and that a backlog of orders is increasing. He stated that the company cannot meet this demand due to a global shortage of chips.

Tesla has the same chips used in their Powerwalls as in its cars, and Musk stated that vehicles should be the priority when there is not enough.

Musk stated during earnings calls that “as this significant shortage is relieved, then we can massively increase Powerwall production.” Musk said during an earnings call that there is a possibility of reaching an annualized rate next year of one million Powerwall units. This could be on the order of 20,000 per week. Again, dependent on semiconductors and cell supply. As we move to sustainable energy production, the sun and wind will be intermittent and require battery packs to ensure a constant flow of electricity. This is why there are so many backup batteries needed when looking at the various utilities around the globe.

Musk stated that Tesla and its suppliers will need to jointly produce 1,000-2,000 gigawatt hours per year to meet energy storage demand. Musk stated that the company had asked its suppliers for a doubled supply of cell power by 2022. Musk was not happy with this goal as it would depend on supply chain problems. Musk stated that the company is currently trying to outsource cell supply to route it to energy storage products. However, as with chip shortages, vehicle production will be prioritised.

Plans for battery cells

While much of the battery cell discussion focused on its 4680 cell that is in development, Musk also touched on Tesla’s intentions to power some of its products with cheaper lithium-iron-phosphate (LFP) batteries. Specifically, he said there’s a good chance that all stationary storage could move to iron-based batteries and away from nickel-manganese-cobalt (NMC) and nickel-cobalt-aluminum batteries.

Musk spoke out about Tesla’s plans, saying that he believes there will be a shift. He said, “I believe probably will see one-third iron and one-third nickel.” This is actually a good thing, because the world has a lot of iron. It’s an incredible amount. There’s a lot less nickel, and a lot less cobalt.

For its long-range electric cars, the remaining third of nickel-based batteries will be used. It would switch all of its other EVs to LFP batteries. This is the same as what happens in Chinese-made vehicles.

Publiated at Tue 27 July 2021, 01:44.38 +0000

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