Will Tesla’s growing Tesla Energy business serve as a catalyst for company growth in 2016?
That’s the question posed by a recent article published on The Motley Fool. While we’ll probably have to wait a while longer to get a real sense of whether or not that’s true, there doesn’t seem to be any doubt that Tesla’s Energy business has gotten off to a good start.
Following the launch of the energy storage business last year, interest and growth expanded (seemingly) beyond what the company was expecting — leading to a speeding up of previous plans. Production of the energy product began at the company’s Fremont facility in the third quarter of 2015, before being (partly) transitioned to the still under-construction Gigafactory in Nevada during the fourth quarter. Cell production is expected to be shifted to the Gigafactory by the end of 2016.
The reason for the fast transition? A repositioning “for strong growth in 2016,” according to Tesla’s 2015 third-quarter shareholder letter — put into action because of “very strong demand for Tesla Energy products globally.”
The fourth quarter 2015 shareholder letter then noted: “(B)oth Powerwall and Powerpack production is now operating smoothly and expanding at the Gigafactory.”
The Motley Fool article provides more:
During the first quarter, the company delivered over 2,500 Powerwalls and nearly 100 Powerpacks, or over 25 megawatt-hours (MWh) of energy. Deliveries spanned across North America, Asia, Europe, and Africa, management said.
…As Tesla Energy sales continue to grow, Tesla has begun to see the impact on its financial statements. Revenue from Tesla’s “services and other” segment, which includes Tesla’s powertrain, service, Tesla Energy, and pre-owned vehicles revenue, was up 131% in Q1 compared to the year-ago quarter. Further, the segment increased from representing 4.9% of sales to 10.5% of sales.
While not all of this segment’s increase in revenue can be attributed to growing Tesla Energy sales, the company does at least cite it as a key contributor to the revenue segment’s growth; the year-over-year growth was driven primarily by “increases in pre-owned vehicle sales, Tesla Energy sales, and maintenance service revenue,” Tesla said in its first-quarter 10-Q filing. Assuming a third of the incremental revenue in the segment came from Tesla Energy, the new segment could already represent about 2.2% of the company’s total sales — enough to become a meaningful driver of the company’s overall business if rapid growth continues. And given Tesla CEO Elon Musk’s recent remarks that Tesla Energy sales could eventually approach Tesla vehicle sales, the company’s optimism suggests growth isn’t slowing.
With demand and production continuing to grow through the end of the year, the energy storage business does seem as though it could serve as a catalyst to further expansion of the company’s plans. So this is a sound argument from the analyst quoted above, in my opinion.