Tesla’s Energy Business Sees Significant Growth Amidst Stalled A.I. Ambitions
By financial measures, Tesla remains an automobile company, but CEO Elon Musk’s vision for the company’s future is centered around self-driving technology and humanoid robots. However, the company’s most promising division right now has little to do with either vehicles or A.I. According to Tesla’s third-quarter earnings report, released on October 22, the energy generation and storage business has been growing steadily, now accounting for 12 percent of the company’s total sales.
The energy unit’s share of total revenue has doubled since 2023, with revenue reaching $3.4 billion between July and September, a 44 percent year-over-year increase. In contrast, Tesla’s EV sales rose only 6 percent to $21.2 billion, while its other revenue sources increased 25 percent to $3.4 billion for the quarter. This significant growth in the energy division is a notable development, especially considering the company’s overall profits plunged 37 percent to $1.4 billion due to tariffs and lowered car prices.
An aerial view of Tesla’s Megapack battery plant in Shanghai, China. VCG via Getty Images
Growth in Energy Demand and A.I. Infrastructure
The energy division’s growth can be attributed to the increasing demand for energy storage products, such as Powerwall and Megapack battery systems. According to Tesla, the company deployed 12.5 GWh of storage products in the July-September quarter, an over 80 percent increase from last year. This surge in demand is largely driven by the A.I. infrastructure boom, with one of the division’s key clients being Musk’s A.I. startup xAI, which spent around $191 million on Megapack products in 2024 and nearly $37 million through February of this year.
Michael Snyder, Tesla’s vice president of energy and charging, stated that “demand for Megapack and Powerwall continues to be really strong into next year,” with the company seeing “remarkable growth in the demand for A.I. and data center applications.” The unit also manufactures solar panels for residential use, which have seen rising demand across the U.S. Snyder announced that Tesla will begin shipping a new domestically produced panel at the start of 2025.
Challenges and Future Prospects
Despite the growth in the energy division, Tesla still faces challenges, including the impact of tariffs on its business. During the third quarter, the company incurred over $400 million in tariff-related costs, split between its EV and energy units. However, Musk remains optimistic about the energy division’s future prospects, stating that its profitability will only increase as the A.I. boom fuels soaring power needs that traditional power plants alone can’t meet.
Musk described Tesla’s energy products as a way to double energy output without the delays and regulatory hurdles of building new facilities. “We see the potential for Tesla battery packs to greatly improve the energy output per year for any given grid—U.S. or otherwise,” he said. As the company continues to navigate the challenges and opportunities in the energy market, it remains to be seen whether Tesla’s energy business will become a major driver of growth and profitability for the company.
Image Source: observer.com
