Tesla (NASDAQ:TSLA) is wrongly regarded by some as “just another auto company”. It is true that in the short term its stock price will probably be mainly affected by the progress of Model 3 production. Autos represent 80% of revenue at the moment. In the long term though its energy storage business can become an engine of further organic growth for the company. My article in June last year gave details of Tesla’s strong position in the market compared to competitors. Developments since then have strongly reinforced this perception.
Tesla’s Energy Storage Business.
Tesla bears point to the fact that the energy storage business is on a small scale. This is true in terms of sales, but not in terms of investment or potential. Tesla Management has repeatedly said that they regard energy storage as the greatest growth area for the company.
The Q3 2017 earnings call gives the details on this. “Energy generation and storage revenue” in Q3 increased to US$317.5 million. This was up from US$23.3 million year-on-year, a percentage increase of 1261%
Gross margin was at 25.3%. The margin will improve this year with better capacity utilisation and manufacturing cost reductions at the Gigafactory. It is relevant here that in the results the facility in Nevada was referred to as “Gigafactory 1”. “Gigafactory 2” has since opened in Buffalo and more will follow.
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