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Tesla: 9.4GWh of BESS deliveries in Q2 drives ‘record profits’ for energy business

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Tesla more than doubled its ‘all-time-high’ quarterly deployment numbers for energy storage in the second quarter of this year.

The US electric vehicle (EV) and energy technologies company reported its latest quarterly financial results last week (23 July).

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Tesla said it deployed 9.4GWh of utility-scale Megapack battery energy storage systems (BESS) and residential Powerwalls in Q2 2024. In Q1, that figure was 4.1GWh, beating its previous record in Q3 2023 by 100MWh. The latest numbers also showed a 158% increase in deployments year-on-year, from 3.7GWh in Q2 2023.

To give further context, the company reported a total of 14.7GWh storage deployments for the full-year 2023.

That performance drove Tesla’s energy business segment’s most profitable quarter to date, and CEO Elon Musk said in an earnings call with analysts that potential demand for energy storage is widely underestimated.

Tesla’s Megapacks are currently produced at a single factory, in Lathrop, California, and shipped worldwide, but a new production plant, in Shanghai, China, is on schedule for opening in Q1 2025, the company claimed.

Lathrop, meanwhile, will be fully ramped to 40GWh annual production capacity by the end of this year.

“I think people don’t understand just how much demand there will be for storage. They really just… like the people, I think, are underestimating this demand by product order of magnitude,” Musk, who is also Tesla’s chief product architect, said.

Musk gave the example of the US power grid, noting the “huge gaps” between peak demand and energy supply. He described how the grid has to “support the load at the worst minute of the worst day of the year,” in order to not have blackouts.

Tesla CFO Vaibhav Taneja said that the company’s “energy storage backlog is strong,” although investors can expect some fluctuation from period-to-period in recognition of orders, deployments and revenue from storage.

While in recent quarters, Tesla has heavily emphasised the contribution from Megapack large-scale deployments to its reported figures, Taneja noted that Powerwall also drove activity in the segment in Q2.

Vertical integration is ‘a unique proposition’

Colin Rusch, a stock analyst with Oppenheimer & Co, asked about Tesla’s strategy around the potential saturation of key energy storage markets, “given that some of these larger systems are starting to shift wholesale power markets in a pretty meaningful way quickly,” as well as how the company planned to remain competitive in the face of growing competition on the supply side.

Taneja and other executives replied that one of the Megapack’s strengths was in Tesla’s full integration of hardware including power electronics and site-level controls, as well as the solution’s software stack.

The CFO claimed that to be a “unique proposition” within the storage space, while Musk claimed customers often try and put together “a hodgepodge solution,” presumably attempting to integrate different hardware and software technologies at site or portfolio level.

“And then that doesn’t work, and then they come back to us,” Musk said.

According to Tesla, saturation of markets is not really happening on a global scale, although it may be in some limited pockets—the UK might be a contemporary example of this—but owing to the huge, often underestimated demand Musk spoke of, the company expected to see different markets open up around the world.

End of IRA subsidies ‘may help Tesla long-term’

No Tesla earnings call would be complete without a statement or two from Elon Musk that might be considered provocative or controversial.

This time out, that talking point, or perhaps one of them, would be the CEO’s view that, having endorsed Donald Trump in the US presidential race a few days ago, the cutting of Inflation Reduction Act (IRA) subsidy policies would not have a major impact on Tesla’ business.

Colin Langan, stock analyst at Wells Fargo, asked what the company thought the impact would be, in the context of some of Tesla’s EV models as well as battery production benefiting from tax credits.

“I guess that there would be like some impact, but I think it would be devastating for our competitors and for Tesla slightly,” Musk said.

“But long-term probably actually helps Tesla, would be my guess, yes.”

Musk then went on to say that the value of Tesla long-term is closely aligned with its ambitions in autonomous vehicle driving and that “all those other questions are in the noise.”

CFO Taneja clarified that Tesla planned its activities irrespective of “whether or not the IRA is there”.

“That’s the way we’ve always modelled everything. And that is the way internally, also even when we’re looking at battery costs, yes, IRA, there are manufacturing credits which we get, but we always drive ourselves to say: ‘OK, what if there is no IRA benefit? And how do we operate in that kind of an environment?’

See Tesla’s Form 10-Q filing of financial results for Q2 2024 with the US Securities and Exchange Commission (SEC).

Conference call transcript by The Motley Fool.

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