Tesla's Energy Storage Business: The New Growth Engine

As Tesla (TSLA) stock rises, it's clear that selling cars is no longer the company's only important metric. The energy storage business has emerged as a significant driver of growth, and investors are taking notice. In 2024, Tesla's energy storage deployments surged to a record 11.0 GWh in the fourth quarter, more than doubling the previous quarter's deployment of 3.2 GWh. This impressive growth can be attributed to the company's strategic investments and regulatory changes that have shaped the energy storage business's trajectory.



Tesla's Megafactory in Lathrop, California, has been a key driver of this growth. The facility, which began production in 2022, produced its 10,000th Megapack by November 2024. This increased production capacity has enabled Tesla to meet the growing demand for energy storage products and has contributed to the company's overall growth in this segment. Additionally, Tesla is expanding its energy storage production capabilities in Shanghai, with trial production of Megapacks beginning in the last week of December 2024. This further suggests that Tesla's energy storage numbers could be even higher in 2025.

Regulatory changes, such as the end of net metering in California, have also played a significant role in shaping the energy storage business's growth trajectory. In the third quarter of 2023, Tesla reported that solar power deployments dropped by 48% to 49 megawatts (MW), which the company attributed to "sustained high interest rates and the end of net metering in California." This decline in solar power deployments, combined with the robust demand for energy storage products, has led to a shift in focus towards energy storage solutions. As a result, the energy storage business has seen impressive growth, with deployments increasing by 90% to 4.0 GWh in the same quarter.

Tesla's strategic focus on the energy storage business has not only driven growth but has also impacted the company's overall revenue and profitability. In 2024, the energy storage business saw a 125% increase in deployments compared to 2022, reaching 14.7 GWh. This growth was driven by the ramp of the Megafactory in Lathrop, California, which produces the Megapack battery, a flagship energy storage product designed for grid-scale applications. As a result, Tesla's energy storage revenues increased by over 50%, outpacing the growth of the automotive business.

In conclusion, Tesla's energy storage business has emerged as a significant driver of growth, outpacing the automotive business in 2024. The company's strategic investments, particularly the Megafactory in Lathrop, California, have been crucial in increasing energy production capacity and meeting the growing demand for energy storage products. Regulatory changes, such as the end of net metering in California, have also contributed to the shift in focus towards energy storage solutions. As Tesla continues to invest in and expand its energy storage business, investors can expect to see this segment play an increasingly important role in the company's overall success.