Tesla Energy Storage Business, Solar Roof Revenues: Heading in Opposite Directions?

Outside of its core electric vehicle (EV) business, Tesla's energy storage and solar roof sales appear to be heading in opposite directions. Indeed, energy storage demand continues to surge, while solar roof sales remain under pressure, Tesla reveled in its Q3 of 2023 earnings report.

The specifics: Tesla's energy generation and storage revenue was $1.559 billion in Q3 of 2023, up 40% compared to Q3 of 2022.

Among the bright spots: Energy storage deployments rose 90% in Q3 of 2023 to 4.0 GWh, Tesla's highest quarterly deployment ever, the company said.

The growth was driven by the ongoing ramp of Tesla's Megafactory in Lathrop, California toward full capacity of 40 GWh, the company said.

Megafactory is one of the largest utility-scale battery factories in North America. The factory will scale to produce 10,000 Tesla Megapack units every year, the company asserts. Megapack (pictured, top of page) is an energy storage system that helps to stabilize electric grids.

During Tesla's earnings call with Wall Street analysts on October 18, 2023, CEO Elon Musk said: "Regarding energy storage, we deployed 4 gigawatt hours of energy of storage products in Q3. And as this business grows, the energy division is becoming our highest margin business. Energy and service now contribute over $0.5 billion to quarterly profit."

Megapack sales drove much of the energy storage revenue momentum -- though there are some caveats to keep in mind. Noted Tesla CFO Vaibhav Taneja during the earnings call: "When it comes to energy margins, Megapack deployment was the key driver there. And that product has done well. I mean, on the cost curve also, we’ve been able to do a lot there. But I do want to caution that Megapack deployments are a bit lumpy. So yes, [energy storage] had a great quarter this period. But depending upon where we are trying to deploy that [Megapack] product in different markets, you would see periods where there would be downward pressure on deployment because of us trying to get the product to that base way."

Tesla Solar Roof Business: Struggling?

Meanwhile, Tesla did not mention its Solar Roof or Powerwall home energy storage business during the earnings call. (Related: See Tesla Solar Roof and Powerwall review here.)

Within the actual earnings report, Tesla said solar deployments in Q3 of 2023 declined on a sequential and year-over-year basis to 49 MW. "Sustained high interest rates and the end of net metering in California have created downward pressure on solar demand," Tesla lamented in the statement. The company faced similar Solar Roof revenue and deployment challenges in Q2 of 2023.

Overall Q3 2023 Revenues: Tesla's overall revenues for Q3 of 2023 were $23.35 billion, up 9% compared to Q3 of 2022. Here's a breakdown of those revenues from the company's earnings report:

The financial results, along with EV unit shipments, fell short of Wall Street's expectations. Tesla's stock ($TSLA) fell nearly 5% in after-hours trading.

Related: Tesla AI Strategy - FSD, Optimus Robots and Dojo Supercomputer details.