Tesla Energy Revenue, Margins, Storage And Solar Deployed

Tesla battery. Source: Flickr Image.

This article presents the statistics of Tesla’s energy segment.

These statistics include the energy segment sales revenue, the respective gross margin, growth rates, and solar as well as storage deployment on an annual and quarterly basis.

The gross margin is meant to check on the profitability of Tesla’s energy business.

Although Tesla’s energy sector may not be as critical as the automotive business, it is a strategic segment that the company can’t do without.

According to the company’s annual reports, the energy segment serves the following roles:

• “The energy generation and storage segment includes the design, manufacture, installation, sales and leasing of solar energy generation and energy storage products and related services and sales of solar energy systems incentives.”

While the energy segment may not be directly linked to the design and manufacturing of car batteries, it leverages many of the component-level technologies from the automotive sector into its energy storage products.

Apart from the inter-relationship, the energy segment also complements the automotive sector by providing a complete renewable energy experience.

For example, Tesla’s supercharger stations may one day be entirely powered by the solar energy generation systems that it develops under the energy segment.

In addition, Tesla’s car owners are now able to install energy generation and storage systems in their own homes so that they can power their vehicles with renewable energy.

All told, let’s start looking at the following topics!

Energy Business

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Tesla’s energy is one of the reportable business segments, similar to the automotive and services sectors.

Tesla’s energy gets its revenue primarily from two major sources:

• 1. Energy generation and storage sales
• 2. Energy generation and storage leasing

Tesla’s energy generation and storage sales revenues come from the sales of solar energy systems and energy storage products to residential, small commercial and large commercial and utility grade customers.

On the other hand, Tesla’s energy generation and storage leasing revenues come from the leasing of solar energy systems as well as electricity to commercial and retail customers.

In this case, Tesla is the lessor and it owns the assets.

Additionally, Tesla’s leasing revenues also come from solar energy systems where customers purchase electricity from Tesla under a power purchase agreement (PPA).

Energy Revenue By Year

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From the perspective of annual revenue, Tesla’s energy segment earned $3.9 billion, $2.8 billion and $2.0 billion in the year ended on 31 Dec 2022, 2021 and 2020, respectively.

Tesla had some of the best revenue growth in the energy segment over the last 3 years.

Energy Revenue By Quarter

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Over the last 3 quarters, Tesla’s energy revenue clocked $1.51 billion, $1.53 and $1.31 billion respectively.

Year over year, Tesla’s energy revenue reported in fiscal 2Q 2023 grew 74%.

In fact, Tesla’s energy shows significant revenue growth in the last 3 quarters compared to a year ago.

On a side note, Tesla’s energy revenue had remained flat for some time after taking over SolarCity in 2016 and it only began to take off in 2020.

Energy Revenue By TTM

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The TTM or trailing 12-month plot above smoothes out the quarterly curve and better reflect the trend of Tesla’s sales in the energy segment.

From a TTM perspective, Tesla’s energy revenue growth began to take off only in fiscal 2020 as shown in the chart above.

As of 2Q 2023, Telsa’s TTM energy revenue hit a record high of $5.5 billion, representing a rise of 15% sequentially and 83% year-on-year.

Energy Gross Margin By Year

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The gross margin measures the gross profitability of a product.

In Tesla’s case, its gross margin accounts for only the costs of revenue while excluding R&D expenses as well as sales, general and administrative expenses.

A high gross margin usually indicates a moat and/or a competitive advantage of a product in the market.

All told, according to the chart, Tesla’s energy does not seem to have a high gross margin.

In fact, Tesla’s energy encountered negative or zero gross margins in some of the fiscal years, illustrating the low moat or poor competitive advantage of the company’s energy segment.

Despite the low gross margin, Tesla’s energy gross margin improved considerably in fiscal 2022 after topping 7.4% by the end of the fiscal year.

On a side note, Tesla’s poor gross margin in the energy segment may have been caused by the high costs of production/installation.

One notable example is the solar roof which Tesla needs to painstakingly train its staff for installation to prevent years of leaks as well as damages down the road.

From a comparison perspective, Tesla’s automotive segments, including the automotive sales and automotive leasing, generate a much higher gross margin of between 20% and 40%.

Energy Gross Margin By Quarter

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On a quarterly basis, Tesla’s energy registered a gross margin of 18.4%, 11.0%, and 12.1% in the last 3 quarters.

Since fiscal 2022, Tesla’s energy gross margin has been fairly stable and significantly expanded to 18.4% as of fiscal 2Q 2023, illustrating the improving profitability of the energy business in 2023 compared to a year ago.

A year ago in the same quarter, Tesla’s energy gross margin clocked only 11.2%.

Energy Gross Margin By TTM

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The TTM plot above looks much smoother compared to the quarterly plot.

As seen, the TTM plot clearly depicts the improving gross margin of Tesla’s energy segment over the last couple of quarters.

As of 2Q 2023, the TTM gross margin stood at 13.0%, a record high since fiscal 2021, and was a massive improvement over the -0.8% gross margin reported a year ago.

In short, Tesla’s years of investment in the energy sector may be paying off now as the profitability of the energy business is on the rise.

Energy Revenue YoY Growth Rates

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Tesla’s energy recorded year-on-year revenue growth of 40%, 40%, and 30% in the year ended on 31 Dec 2022, 2021, and 2020, respectively.

The period between 2020 and 2022 represents some of the best years for Tesla’s energy segment.

Solar Deployment By Year

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Tesla’s solar deployment in fiscal 2022 was flat compared to a year ago but was up 70% over 2020.

Tesla stated that the stagnant solar deployment in fiscal 2022 was due primarily to the high-interest rate environment that has been causing an industry-wide postponement of solar purchasing.

Solar Deployment By Quarter

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Tesla’s quarterly solar deployment declined significantly in fiscal 2023.

For the first 2 quarters in 2023 alone, Tesla recorded a solar deployment of only 67Mw and 66Mw, respectively, down significantly from fiscal 2022.

Solar Deployment By TTM

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While Tesla’s solar deployment recovered from the slump encountered during fiscal 2020, it has been flat afterward as shown in the TTM plot above.

As of fiscal 2Q 2023, Tesla’s TTM solar deployment totaled 327Mw, which was roughly in line with the result reported a year ago.

Energy Storage Deployment By Year

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Unlike the solar deployment, Tesla’s energy storage deployment has never slipped a bit even during the height of the COVID-19 crisis in fiscal 2020.

Since fiscal 2018, Tesla’s storage deployment has grown by more than 500% and reached a record high of 6.5GWh as of fiscal 2022.

Tesla’s record energy storage deployment has been a result of the ongoing ramp of the Megapack factory (Megafactory) in Lathrop, CA.

It looks like Tesla is hitting the right spot in the energy storage business.

Energy Storage Deployment By Quarter

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Tesla more than tripled its energy storage deployment in fiscal 2Q 2023 from the same quarter a year ago to reach 3.7GWh.

However, the figure was slightly lower sequentially.

As shown in the plot above, Tesla’s energy storage deployment massively soared in fiscal 2022 and the uptrend seems to continue towards fiscal 2023.

Energy Storage Deployment By TTM

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The TTM plot depicts the significant rise in Tesla’s energy storage deployment since fiscal 2022.

On a TTM basis, Tesla’s energy storage deployment hit 12.1GWh as of 2Q 2023, a new high over the past 6 years.

Energy To Total Revenue Ratio

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Tesla’s solar business used to contribute more than 10% of sales to total revenue as shown in the chart above.

Since fiscal 2018, this ratio has dropped drastically and reached as low as 4.4% in the first half of 2022.

However, in recent quarters, the ratio of energy to total revenue had risen to record highs and reached nearly 6% as of 2Q 2023.

The rising ratio of energy to total revenue illustrates the growing significance of Tesla’s energy as well as the improving business prospects in the energy business segment.

Energy Vs Automotive Revenue

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To get an idea of how much Tesla’s energy business has progressed with respect to automotive revenue, the chart above shows the revenue comparison between the energy and automotive segment on a TTM basis.

That said, the chart above depicts a huge contrast between Tesla’s energy and automotive revenue and the gap is growing.

As of fiscal 2Q 2024, Tesla’s automotive segment was about 15X bigger than its energy counterpart in terms of sales figures.

For example, Tesla’s TTM automotive revenue totaled $81.2 billion compared to only $5.5 billion recorded in the same quarter for the energy sector.

The gap between Tesla’s automotive and energy sales was much smaller in earlier years compared to recent results, illustrating the much faster growth of the automotive segment over the solar business.

That said, Tesla’s energy may close the gap soon considering that it is starting to gain traction.

Elon Musk believes that the energy business may ultimately be as huge as if not bigger than the automotive business someday in the future when the adoption of renewable energy accelerates.

Therefore, are we seeing a similar explosive growth in the energy segment similar to the automotive sector?

Conclusion

We are starting to see some traction in Tesla’s energy based on recent results.

As seen, Tesla’s energy is starting to make money as reflected in the rising margins and improving profitability.

While Tesla’s energy is gaining ground, especially in the energy storage segment, there is still much work to do for Tesla.

I believe Tesla’s energy is on the right track.

What do you think?

Please leave your comment below.

References and Credits

1. All financial figures presented in this article were obtained and referenced from Tesla’s financial statements, SEC filings, earnings releases, shareholders letter, annual reports, etc, which are available in Tesla Update Letters and Presentations.

2. Featured images were used under Creative Common License and obtained from Dave Dugdale and Nick Ares.

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