Tesla's Ace in the Hole: Why the Energy Business Could Supercharge Returns

• By Staff Editor
• Jul 25 2024

As Tesla's automotive business navigates growing competition and cyclical pressures, one often overlooked part of the company is emerging as a potential blockbuster growth driver - the Tesla Energy division.
Here's why investors need to keep a close eye on this energy storage juggernaut:

Tesla's Q2 Energy Highlights:
• Deployed record 9.4 GWh of battery storage, over 2x the prior quarter
• Segment revenues hit $3 billion, gross profit $740 million
• Energy gross margins expanded to 24.6% vs 18.4% a year ago
• Now accounts for 16.3% of Tesla's total gross profit, up from 6.1% a year earlier

Why Energy Could Be a Game-Changer
• Beneficiary of potential energy shortages driving storage demand
• Provides energy arbitrage opportunities from price volatility
• Addresses need for greater grid resilience and backup power
• Could see policy tailwinds supporting storage buildout

What It Means for Investors
• Additional high revenue growth vector beyond autos
• Rapidly growing profit stream from high-margin storage
• Reduces Tesla's exposure to cyclical automotive demand
• Early mover advantage and optionality in emerging market
• Potential share price catalyst as market appreciates energy upside

Risks to Watch
• Supply chain constraints temporarily capping growth
• Consumer demand impact if shortages lead to higher energy prices
• Increasing competition in storage over time

The energy storage market is still nascent, but Tesla has executed flawlessly so far. If demand really takes off amid potential shortages, this hidden growth engine could supercharge returns for investors willing to look beyond just the auto business.

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