Can Tesla’s Energy Business Save It as Car Sales Fall?

Tesla Inc. (NASDAQ: TSLA) is in two businesses. One is electric vehicles (EVs) and the other is energy and storage. Energy and storage revenue rose 67% in the past quarter to $2.7 billion. That is well under auto revenue, but EV revenue was down 20% to $14 billion. The energy and storage segment has an impressive cost of revenue of $1.9 billion.

Energy Storage News reports that “the segment provides products for both residential and large-scale energy storage. This includes the Powerwall for homes, the Powerpack for businesses, and the Megapack for utilities and large-scale projects.” Tesla CEO Elon Musk commented in late 2024 that the storage business was “growing like a wildfire.”

The energy and storage business will not surpass EV sales, but it might provide most of Tesla’s operating income in the short term. This is similar to what AWS did for Amazon when its core e-commerce business slowed.

Tesla needs to be able to produce a positive net income, particularly if its EV sales continue to decline. In Europe in May, sales dropped by double-digit percentages year over year. In China, the world’s largest EV market, sales fell 15%. Tesla does not report U.S. sales, but there is a good chance they declined in May as well.

Tesla is counting on its AI-driven products to push its share price back up. It launches its self-driving robotaxi in Texas this month. Its success or failure could move the stock price in the near term.

In the meantime, Tesla has a rapidly growing division that could prop up Tesla’s earnings.

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