Tesla battery. Source: Flickr Image.
This article presents the energy revenue of Tesla, the respective gross margin, growth rates, and solar as well as storage deployment on a TTM basis.
The gross margin is meant for a profitability check of Tesla’s energy business.
For your information, Tesla (NASDAQ:TSLA) energy has been an important business segment after the SolarCity acquisition which was completed in 2016.
Despite the expanding role of the energy sector, Tesla’s energy revenue actually made up only 4% of the company’s total sales as of fiscal 4Q 2022 and this ratio has been on a decline.
While the energy revenue contribution may look small, it has been growing at an average YoY growth rate of around 37% since fiscal 2017.
Still, Tesla’s energy has been an unprofitable business and has reported negative gross margins in the past several quarters.
While having been unprofitable, Tesla’s energy has great synergy with the automotive segment.
For example, Tesla has been promoting and cross-selling its solar and battery storage products to its own automotive customers.
By doing so, Tesla not only gets extra sales revenue but also provides a complete renewable energy experience for its automotive customers.
Aside from home applications, Tesla’s solar and battery technology also can be applied at its own supercharger stations to provide renewable energy for charging purposes.
Therefore, Tesla energy is one such important business sector that the company can’t afford to lose.
All told, let’s start with the following topics!
Tesla Energy Topics
1. Energy Business Overview
2. Energy Revenue By Quarter
3. Energy Revenue By TTM
4. Solar Deployment
5. Energy Storage Deployment
6. Quarterly Energy Gross Margin
7. TTM Energy Gross Margin
8. Energy To Total Revenue Ratio
9. Energy Vs Automotive Revenue
10. Energy Revenue QoQ Growth Rates
11. Energy Revenue YoY Growth Rates
12. Conclusion
13. References and Credits
14. Disclosure
Tesla’s Energy Business
Before we begin, let’s take a look at the following diagram that demonstrates Tesla’s business segments.
Tesla business segments (click to enlarge)
As shown in the snapshot above, Tesla’s energy is one of the main business segments that is located in the same hierarchy as the automotive and services sectors.
Tesla’s energy sector gets its sales 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.
Let’s move on to look at the company’s energy revenue or sales numbers.
Tesla’s Energy Generation and Storage Revenue (Quarterly)
Tesla’s quarterly energy revenue
The chart above shows Tesla’s quarterly total energy or solar revenue for the period from fiscal 2017 to 2022.
As mentioned in prior discussions, Tesla’s energy or energy generation and storage revenue comes from the sales and leasing of solar energy systems, electricity, and energy storage products such as batteries and large-scale battery packs.
For your information, Tesla completed the acquisition of SolarCity in 3Q16 and consolidated the financial results from SolarCity starting in 4Q16.
Prior to the SolarCity acquisition, Tesla’s sales revenue from the energy business was insignificant.
However, after the SolarCity acquisition, Tesla’s energy revenue started to soar and continued to grow significantly as shown in the chart above.
Since then, Tesla’s energy revenue has been on a rise and surpassed the $1 billion threshold in 2022 3Q for the first time.
As of fiscal 4Q 2022, Tesla’s energy revenue came in at $1.3 billion on a quarterly basis, a record high and up 17% from the prior quarter or 90% year-over-year.
Tesla’s Energy Generation and Storage Revenue (TTM)
Tesla’s TTM energy revenue
The TTM or trailing 12-month plot above is created to smooth out the quarterly curve and to better reflect the trend of Tesla’s energy sales.
From a TTM perspective, Tesla’s energy revenue grew the most in the early stage of the business which was right after the SolarCity acquisition as shown in the chart above.
Thereafter, Tesla’s TTM revenue has remained flat in fiscal 2018 and has even declined slightly in fiscal 2019.
Nevertheless, Tesla’s energy revenue has returned to growth again in fiscal 2022 as shown in the TTM plot above.
As of Q4 2022, Tesla’s TTM energy revenue clocked in at nearly $4 billion USD, up 40% from a year ago or 19% from the previous quarter.
At an average YoY growth rate of 27%, Tesla’s energy revenue will most likely exceed $5 billion on a TTM basis by the end of fiscal 2023.
Tesla’s Solar Deployment (TTM)
Tesla’s solar deployment
The discussion of Tesla’s energy without including the solar deployment would be incomplete because it is one part of the energy business that partially contributes to the energy sales revenue.
Therefore, in this section, I have included a chart above that represents Tesla’s solar deployment presented on a TTM basis.
All said, according to the chart, Tesla’s solar deployment has significantly recovered in fiscal 2022 compared to a year ago.
You can see that Tesla deployed the least amount of solar power in fiscal 2020 when the COVID-19 outbreak was just starting.
However, Tesla’s solar deployment significantly recovered in fiscal 2021 despite the ongoing pandemic and the supply chain crisis which has been impacting various economic sectors.
As of fiscal 4Q 2022, Tesla’s solar deployment clocked at 348MW on a TTM basis, a new high in 2022 and representing a year-on-year growth rate of about 1%.
Compare to fiscal 2020, Tesla’s solar deployment in 2022 was more than double the number reported in 2020.
In short, Tesla’s solar was back to growing again in fiscal 2022 after slipping considerably in fiscal 2020 and early 2021.
Tesla’s Energy Storage Deployment (TTM)
Tesla’s energy storage deployment
Similarly, Tesla’s energy storage is another part of the company’s energy business that generates significant sales revenue.
That said, the TTM chart above shows that Tesla’s energy storage deployment has been on fire.
According to the chart, Tesla deployed a significant amount of energy storage over the years and the figures have been increasing.
As of fiscal 4Q 2022, Tesla’s energy storage deployment grew 64% year-over-year to a massive 6.5 GWh on a TTM basis, one of the best results ever produced since 2021.
Unlike the solar deployment which we saw in prior discussions, Tesla’s energy storage deployment has never slipped even during fiscal 2020 despite the COVID-19 as well as the supply chain headwinds.
More importantly, Tesla deployed a record amount of storage in fiscal 2022, more than double that of 2021.
Tesla’s Energy Gross Margin (Quarterly)
Tesla’s quarterly energy revenue gross margin
As mentioned, the gross margin is a metric that measures the gross profitability of a product.
In Tesla’s case, the gross margin includes only costs of revenue while excluding R&D as well as sales, general and administrative expenses.
A high gross margin usually indicates a competitive advantage a company has over its competitors.
All told, on a quarterly basis, Tesla’s energy gross margin has been on a roller-coaster ride in the last 3 years, bouncing dramatically between -20% and 30%.
Despite achieving a high gross margin back in fiscal 2017 in the energy segment, the figure slowly declined to less than 5% and even to the negative region as of fiscal 2022.
A likely cause of the declining gross margin may have been the growing costs of production/installation in the energy sector.
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.
In fiscal 4Q 2022, Tesla’s energy gross margin came in at 12% compared to the prior year’s result of -7.4%, indicating that the company’s energy sector profitability has significantly improved.
From a comparison perspective, Tesla’s automotive sector, including the automotive sales and automotive leasing revenues, generates a gross margin between 20% and 40%, underscoring the unprofitable nature of the energy segment compared to the automotive.
Tesla’s Energy Gross Margin (TTM)
Tesla’s TTM energy revenue gross margin
The TTM chart above looks much smoother compared to the quarterly plot.
As seen, the TTM plot clearly depicts the slipping of Tesla’s gross margin on a long-term basis.
Since fiscal 2017, Tesla’s energy gross margin has been on a decline from about 24% down to -4.6% in 2021 Q4.
The decline in Tesla’s energy gross margin was the steepest in fiscal 2020 and it further slipped to the red in fiscal 2021.
Tesla’s declining gross margin may have been attributed to the company’s major expansion in the energy segment.
For your information, Tesla has been pouring in huge resources into the energy segment and is in the process of ramping up a dedicated 40GWh Megapack factory located in Lathrop, California, according to the 4th quarter earnings release.
Tesla’s huge investment in the energy segment may have driven the sector to become unprofitable in fiscal 2021.
However, once Tesla achieved a certain amount of return on investment, the energy segment gross margin will recover and may head to profitability again, just like what it did to the automotive segment.
And, it already has happened in 2022.
As seen, Tesla’s energy gross margin has been on a rise in 2022.
As of Q4 2022, the TTM gross margin stood at 7.4%, a record high since 2021, and was a massive improvement compared to -4.6% reported a year ago.
In short, Tesla’s investment in the energy sector is paying off now as reflected in the growing energy gross margin.
Tesla’s Energy Revenue To Total Revenue Ratio
Tesla’s energy revenue to total revenue ratio
Tesla solar business contributed around 10% of sales to total revenue prior to 2019 as shown in the chart above.
This figure dropped dramatically in recent quarters and reached as low as 4.4% as of the first half of 2022.
This figure rose slightly to 4.8% by the end of 2022 as shown in the chart.
Tesla’s soaring automotive revenue may have to do with the decline of the energy ratio over the years.
While Tesla’s energy revenue has been increasing, the ratio decreases, illustrating that other revenue streams may have been at play and growing at a much faster rates.
At around 4.8% of total revenue in the latest quarter, Tesla’s energy sector does not seem to be a major growth driver for the company at this moment.
Nevertheless, Tesla’s energy business will remain an integral part of the company’s strategy in transitioning the world to using renewable energy.
Tesla’s Energy Vs Automotive Revenue
Tesla’s energy revenue vs automotive revenue
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 4Q 2022, Tesla’s automotive segment was nearly 20X bigger than its energy counterpart in terms of sales figures.
For example, as of 2022 Q4, Tesla’s TTM automotive revenue totaled $71.5 billion while the TTM energy revenue clocked in at only $3.9 billion in the same quarter.
The gap between Tesla’s automotive and energy sales was much closer in prior years compared to the current result, illustrating the exponential growth rates of the automotive segment over the solar business.
That said, Tesla’s energy may grow much faster in the future considering that it is still in its infancy.
Tesla believes that the energy business may ultimately grow to be as huge as or even bigger than the automotive business someday in the future when the adoption of renewable energy accelerates.
Tesla’s Energy Revenue Sequential Growth Rates
Tesla’s energy revenue QoQ growth rates
In the 4th quarter of 2022, Tesla’s energy sales increased 17% sequentially compared to the prior result of 29% reported in 3Q 2022.
Overall, Tesla reported much more positive sequential growth rates than negative sequential growth rates in the chart.
Tesla’s Energy Revenue Year Over Year Growth Rates
Tesla’s energy revenue YoY growth rates
Tesla continued to report a positive growth rate that clocked at 90% in solar revenue in the 4th quarter of 2022 compared to a much smaller growth rate of 38.6% reported in the prior quarter.
Overall, Tesla’s year-on-year growth rates in the energy segment have been very impressive as reflected in all the positive numbers in the chart.
Conclusion
As of 2022 Q4, Tesla’s energy revenue came in at $1.3 billion on a quarterly basis or $3.9 billion on a TTM basis.
While revenue has been on a rise, Tesla’s energy gross margin has been on a decline, clocking in at -7.4% in Q4 2021 on a quarterly basis or -4.6% on a TTM basis.
At a negative gross margin, Tesla energy was highly unprofitable.
However, this ratio has been on a rise in 2022, showing the improving profitability of the energy segment.
As of 4Q 2022, Tesla’s energy gross margin reached 12.1% on a quarterly basis or 7.4% on a TTM basis, a much better figure compared to that a year ago.
Therefore, Tesla’s years of investment in the energy sector has paid off and it is no longer an unprofitable venture.
References and Credits
1. All financial figures in this article were obtained and referenced from Tesla’s quarterly and annual reports 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.
Disclosure
The content in this article is for informational purposes only and is neither a recommendation nor a piece of financial advice to purchase a stock.
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