Tesla Energy Is Quietly Becoming the Real Tesla.
Tesla Energy is hiding in plain sight. And it's scaling fast.
Summary
Tesla Energy Is Quietly Becoming the Real Tesla.
Battery Industry Pulse: Weekly Roundup.
Welcome back to another edition of my newsletter! - Week 24 2025
Every week, the world writes about Tesla. Stock moves, quarterly deliveries, FSD updates, Musk tweets, rinse and repeat. But in all the noise, one thing remains criminally under-covered: Tesla Energy.
This isn’t a side hustle. It’s not a vanity division or some distant moonshot. It’s the part of Tesla that could one day matter more than the cars.
It's quietly becoming the company's future, even if most observers still box Tesla as an automaker. That convenient tag is quickly becoming obsolete.
Not Just a Battery Box: Tesla’s Second Business
Tesla Energy is the division responsible for stationary energy storage and grid-scale solutions. Its flagship, the Megapack, holds 3.9 MWh of LFP storage in a container-sized shell, complete with cooling, electronics, and software.
Tesla’s batteries use LFP chemistry. It’s cheaper and safer than NMC, with no cobalt or nickel. The tradeoff is lower energy density, less range for EVs, but perfect for stationary storage. What matters is cost and cycle life. LFP is the most suitable battery chemistry.
On the residential front, the Powerwall offers homeowners a reliable 13.5 kWh battery. Installed alongside solar panels, it guards homes against blackouts and peak energy prices.
Strong Deployment Numbers
In 2024 alone, Tesla delivered 31.4 GWh of energy storage, a sharp jump of 114% from 2023's 14.7 GWh. The momentum grew, with Q1 2025 deployments rising 154% year-over-year, hitting 10.4 GWh.
“It won’t be long before we’re shipping 100-gigawatt hours a year stationary storage at Tesla, Elon Musk said during TSLA Q3 2024.
Outgrowing the Car: The Energy Business by the Numbers
Revenue in Tesla’s energy division surged to $10 billion in 2024, up 67% from about $6 billion the previous year. To provide context for this growth, Tesla's energy revenue has increased by more than 800% since 2017. Contrast this with its automotive segment, which experienced a 6% decline in revenue to $77 billion in 2024.
Margins tell the real story. In Q1 2025, the energy division posted a gross margin of 28.8%. Fluence, a direct competitor, lagged far behind at 12.5%. Tesla isn’t just winning, it's widening the gap.
Manufacturing Capabilities Scaling Fast
Tesla operates two dedicated Megafactories, each pushing out significant volumes of stationary storage. The Lathrop factory in California, with a 40 GWh annual capacity, recently celebrated its 15,000th Megapack 2 XL. In Shanghai, Tesla’s newest Megafactory targets Lathrop’s output, setting the stage for combined annual production of 80 GWh.
Should Tesla add a European factory to this mix, production will exceed Musk’s public goal of 100 GWh per year.
But scaling production isn't just a matter of factory output. It also depends on what Tesla can source and from where. That’s where geopolitics enters the picture.
Navigating Trump's Tariff Impact
Tariffs introduced by Trump’s administration present serious hurdles. Chinese-made LFP cells, the core of Tesla’s stationary batteries, are heavily impacted. New tariffs now total nearly 65%, with potential escalation to over 82% by 2026.
Tesla currently relies heavily on CATL in China for these cells. This dependence poses significant risks. However, LG Energy Solution’s newly established LFP manufacturing lines in Michigan offer a strategic off-ramp. Diversifying suppliers could shield Tesla from escalating geopolitical risks and tariffs.
Tesla plans to produce its own LFP cells in Nevada and therefore reduce reliance on external suppliers.
"Uncertainty in the automotive and energy markets continues to increase as rapidly evolving trade policy adversely impacts the global supply chain and cost structure of Tesla and our peers," the company said.
Tesla’s Secret Weapon: Software
Most battery folks know the Megapack by now. But what’s underappreciated is its function as a platform, not just a product.
Each Megapack comes integrated with Tesla’s software, control systems, and maintenance stack. That makes every Megapack a software asset once deployed. It’s embedding itself into the grid infrastructure.
The scaling is also surgical. It’s striking large deals (100 MW here, 500 MW there) and locking in decades of revenue.
It’s also stacking these deployments globally. In Australia, it helped stabilize an entire region’s grid (eg. Victorian Big Battery). In California, it’s enabling utilities to shut down gas plants. A new Virtual Power Plant pilot in Texas aggregates 17 MW of residential Powerwalls into ERCOT markets, adding yet another recurring-revenue layer. Globally, more than 100,000 Powerwalls participate in similar programs.
The most interesting part of Tesla isn’t on the road anymore. It’s on the grid. As demand for energy storage surges, Tesla Energy could eventually outgrow the car business. Its margins are already stronger. The risk? Rising competition and commoditization could squeeze those margins over time.
Now, let’s look at this week's battery market developments.
Battery Industry Pulse: Weekly Roundup
Metals
Zimbabwe targets battery-grade output with 2027 lithium concentrate export ban
EU announces 13 critical raw materials projects in third countries
Components
Battery
China’s No 5 EV battery maker Eve Energy jumps on Hong Kong IPO bandwagon
Toshiba delivers first battery samples with niobium-titanium oxide anode
Commercial Vehicles
Passengers Cars
BESS
Gurīn Energy selects Saft’s battery energy storage system for first Japanese project
AES completes 1GW Bellefield 1 solar and storage facility in US
AfDB announces $184m for solar and battery storage project in Egypt
Charging Infrastructure
Mitsubishi debuts EV battery swap network for cars AND trucks in Tokyo
CATL partners to co-deploy battery swappable vehicles in Hong Kong
Policy
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