Tesla Energy Is A Massive Business Worth Over $10B And Growing

Tesla Model X and Solar Roof

APR 22 2018 BY EVANNEX 18

TESLA ENERGY IS WORTH $10B+ AND GROWING

Guest Blog Post: Galileo Russell*

Not just another car company

Tesla isn’t a car company. It’s a battery company that sells most of its batteries with wheels attached.

Blue Tesla Model S and Tesla Powerwall

Source: Tesla

Perhaps the most underappreciated facet of Tesla’s bull-thesis is the company’s leadership in transitioning our grid off fossil fuels and onto renewables.

*This article comes to us courtesy of EVANNEX (which also makes aftermarket Tesla accessories). Posted by Matt Pressman. The opinions expressed in these articles are not necessarily our own at InsideEVs.

If everybody starts driving electric cars, we will need a lot of energy to power them. Creating the infrastructure to generate and store that energy renewably is a massive opportunity.

Tesla Energy

Launched in 2015, Tesla Energy is rapidly becoming a globally recognized leader in both commercial and residential renewable energy solutions.

RELATED: HBO’s Vice Focuses On Tesla Energy – Video

Starting with a modular battery product known either as the Powerwall (residential) or Powerpack (commercial), Tesla has gone all-in on producing not only the world’s cheapest batteries, but also the world’s most efficient ones.

Tesla Powerwall

Source: Tesla

Batteries may just be the most important part of the renewable energy revolution. The most popular emerging sources of renewable energy are solar panels and wind turbines. Although these technologies produce a lot of energy and continue to improve, they do not produce power consistently. Batteries like ones that Tesla has designed serve to store this energy as it’s generated, and disperse it when needed.

Beyond batteries, Tesla is also a world-leader in solar energy.

In November 2016 Tesla acquired SolarCity, and overnight became a renewable energy titan. The combination of bringing batteries and solar panels in-house opens up incredible synergies in Tesla’s business.

Tesla’s unique retail distribution strategy allows the company to educate consumers about its products, and sell consumers on its trifecta of green solutions. The future of an electric car in your driveway, solar panels on the roof and battery storage in your garage is coming fast thanks to Tesla.

Customers purchasing electric vehicles usually want batteries and solar panels too. It is estimated that Tesla already has some of the world’s highest retail sales per square foot, and that number is only going up as the company matures and expands its product lineup.

Shortly after the acquisition of SolarCity was announced, Tesla unveiled its Solar Roof product.

Tesla Model X and Solar Roof

Source: Tesla

This is a game changer for the residential solar industry from both an economic and aesthetic perspective. Integrating solar panels into a roofing product looks great (the way that Tesla has done it), and it means the functionality of a roof and solar energy can be intertwined in a single purchase.

Much like most of Tesla’s products, the Solar Roofs have a backlog well over a year long. Sales are expected to ramp gradually throughout 2018 as Tesla scales production.

Valuation

Despite being under 3 years old, Tesla Energy is already a massive business.

Aided by the 2016 acquisition of SolarCity, Tesla’s “energy generation and storage” revenue was $1.1B in 2017, up a whopping 516% from the year prior. In its Q4 ‘17 shareholder letter, Tesla laid out a goal to triple its energy storage deployments in 2018. Although its solar business will likely grow slower than that, overall Tesla Energy is prepping for another record year in 2018.

Only a small fraction of the world’s energy is currently derived from renewable sources, and that is poised to shift dramatically in the coming decades.

As Tesla continues to improve its battery technology and the cost of solar panels continues to fall, its solutions are getting more economical by the day. The same can’t be said for fossil fuel alternatives.

The cost trajectory of renewable solutions along with growing public sentiment surrounding the need to go green bodes very well for the future of this industry.

If Tesla can maintain a leadership position in battery cost and performance by leveraging its advanced robotic manufacturing process and vertical integration, its energy division will see epic growth for years to come.

I’m expecting Tesla Energy to nearly double in 2018 to $2.2B, and gross margins to improve slightly from 22% in 2017, to 23%.

Chart showing Tesla Energy Revenue Growth

Source: Hyperchange TV

With revenue run-rate that is poised to scale beyond $2B in the very near-term and continue growing at 50% for years to come, Tesla Energy could be valued at $10B if it were a standalone company.

This would put the current Price/Sales multiple at 4.5X, or about where Tesla trades relative to its 2017 financials. This is a premium to most lower margin commodity product businesses, but it’s justified by Tesla Energy’s growth prospects.

Tesla’s Gigafactory 2, located in upstate New York has the capacity to produce enough solar panels to power 150,000 homes annually. With some quick back of the napkin math it’s easy to get really excited about this opportunity. At an average price of $30,000 per system, a fully scaled Gigafactory 2 could be generating $4.5B in incremental revenue for Tesla. That’s not including all the battery sales that would go along with the demand for that level of residential solar installations.

On a quarterly basis, Tesla’s growth has been palpable. It’s important to keep in mind that Q4 is seasonally weak for this business (the sun shines less in the winter).

Chart: Quarterly Tesla Energy Revenue

Source: Hyperchange TV

Going forward, this will be an increasingly important piece of Tesla’s business to watch as it matures in 2018 with ramping storage deployments and growing Solar Roof sales.

Conclusion

The world is going to need a lot more batteries and solar panels over the next 20 years to transition us off fossil fuels.

Not only is this a multi-billion dollar business opportunity for Tesla, but it’s a feel-good story for our planet.

Going green is no longer just the morally right thing to do, it’s the economically right thing to do.

If Tesla can maintain a leadership position in batteries and solar panels, it will enjoy tremendous tailwinds from this industry-wide shift.

As a shareholder and climate activist, I couldn’t be more excited about the future of Tesla’s energy business.

Video

Source: Hyperchange TV

===

*Guest Blog Post: Galileo Russell is a 25-year-old Tesla shareholder based in NYC. He has been blogging about Tesla since 2012 and is the founder of HyperChange TV, a new YouTube channel about tech and finance news for millennials.

*Editor’s Note: EVANNEX, which also sells aftermarket gear for Teslas, has kindly allowed us to share some of its content with our readers. Our thanks go out to EVANNEX, Check out the site here.

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18 Comments on "Tesla Energy Is A Massive Business Worth Over $10B And Growing"

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Don Zenga

Happy Earth Day Folks.

Very nice to see the Tesla Model-3 sales ramping up. A lot has been achieved in the last year.
1.4 million plugin vehicles sold.
94 GW of Solar PV capacity installed.
50 GW of Wind capacity installed.
More power storage facilities developed worldwide.
Now the Concentrated Solar Power is in the Chinese radar which means this source of energy will also develop faster.

TM

Strange that Solar was more than Wind.
This source has 99 GW of solar installed – close to your number.
https://cleantechnica.com/2018/03/19/global-solar-market-installed-98-9-gigawatts-in-2017/
I also see other sources saying ~50 ish GW of wind. Guess wind is hit and miss because the projects are so big.

But cumulative we have:
Wind = 540 GW – https://www.statista.com/statistics/268363/installed-wind-power-capacity-worldwide/

Solar – = ~400 GW – https://www.greentechmedia.com/articles/read/global-solar-capacity-set-to-surpass-global-nuclear-capacity#gs.z8zxl=w

Those are getting to be serious numbers.

Ron M

Actually there’s 89 GW of wind turbine capacity installed in the US.

Nix

Tesla is also developing an uber-like ride-sharing business, which could also be a multi-billion dollar company even if it is only a fraction of the size of Uber.

Ron M

Apple developed a robot that can disassemble 200 IPhones an hour. Separating all the components from rare earth materials, copper, silver, plastic etc. so that there phones become completely recyclable.

Hopefully Tesla can do the same with there batteries and solar panels so it becomes a closed loop.

John Doe
They can not be fully recycled. The closest to be that was the feature phones from Nokia, back when they made hardware in Europe, with fully detailed cradle to the grave documentation of all the raw materials. The batteries are not fully recycled, the display is not fully recycled and some of the plastic contain additives that makes it a processed material that has a very limited new market (usually as a filler material). It’s not like a pure PE plastic product. Even a products that is stripped to individual components have to go through a lot of chemical and mechanical steps to be made to useful products again. Not to be all negative, but it is a major operation to recycled electronics. Some manual, some mechanical, some chemical. Watch how electronics are recycled at a huge facility, and people will understand. To properly recycle electronics is expensive, and many countries only partially recycle the electronics – and remove iron/steel/copper/aluminium, glass and send the rest to a special facility (often in another country), to remove fiberglass, rare earth metals and so on. The rest is burned in a special facility under very high temperatures. The high cost, and the complexity… Read more »
Ron M

https://www.msn.com/en-us/news/technology/apple-e2-80-99s-recycling-robot-disassembles-200-iphones-an-hour/ar-AAw9lqS?ffid=gz

Here’s the link to the iPhone there’s also several other articles on the web with photos.

Another Euro point of view

Worth $10B because it will triggers massive net profits sometimes in a distant future or does it make net profits now ?
If Tesla is so confident in the success of those different branches of activity (Car manufacturing, energy storage & solar energy), why is Tesla not publishing net income per branch of activity in its SEC filings ? (they only give consolidated net income figures/no breakdown per activity).
It would be so much easier to believe in the story if there was a clearer picture financial wise. In present situation anything can be said about anything regarding Tesla and this does not give confidence except for the hard believers which in 95% of the cases are financial filings illiterate.

Tom

The breakdown would scare investors not reassure them.

Nix
Tesla provides all the information needed to separate out their automotive vs. energy financials. Here is how they break out the segments straight out of the latest 10-K report: REVENUE: 10,642,485 — Total automotive & services and other segment revenue 1,116,266 — Energy generation and storage segment revenue COST OF REVENUES AND GROSS MARGIN: 8,661,726 — Total automotive cost of revenues and services 874,538 — Energy generation and storage They even hand you the Gross Margins on both Automotive (23%) and Energy sectors (22%). on a silver platter. What information do you think would make the picture more clear that could be gleamed from net numbers? What grand conspiracy theory are you fantasizing about in the net numbers (as if any company could attribute stuff like C-level compensation, interest payments, taxes, etc to just one segment or another)? I’m sorry you aren’t able to understand what each part of an SEC report is for. I’m sorry that even when handed the relevant data on a silver platter you will remain intentionally blind to what is provided to you, and will try to distract from reality by whining endlessly in conspiracy nuttery about some imagined slight. The clear reality is that… Read more »
doggydogworld

Tesla is the only company I’ve seen that does NOT break out operating profit (e.g. gross profit – SG&A – R&D) by reporting segment. And I’ve looked at lots of companies over the years. Such info is very helpful, especially when looking at trends of segments undergoing change.

If you’d like to provide another example of a company that doesn’t report operating profit by segment, I’d really love to see it. Otherwise, you might consider dialing the condescension back a few notches.

fotomoto

“While more than 85 percent of Tesla shareholders supported the 2016 acquisition, a loud minority contended Musk engineered it to rescue SolarCity from swelling debt. He was SolarCity’s chairman and largest financier.

Before the deal was completed, Musk tweeted that while Tesla would absorb SolarCity’s debt, he would “pay it personally if need be.”

Last week, a judge in Delaware ruled that shareholders who allege Musk duped them into backing the purchase could proceed with a lawsuit, saying they’d produced enough evidence showing the deal may have been flawed by conflicts of interest.”

https://www.bloomberg.com/news/articles/2018-04-06/hidden-by-model-3-mess-tesla-s-other-problem-is-about-to-emerge

They’re talking $3 billion here.

Daniel P

Panasonic isn’t a car company, it’s a battery company that sells its products to Tesla.

arne-nl

“At an average price of $30,000 per system,”

30k for an *average* solar system? Maybe better to start with a third of that price. I’d like to know where the author got this number from.

a-kindred-soul

Tesla does the installation of solar panels (as Solar City did before) and those are indeed probably around $ 10.000. But since shortly they also do Solar Roofs. Those are not panels on an existing roof, they are the roofs themselves. The first ones now installed were around $ 100.000 if I remember well, but they were still a bit like test roofs and on large and expensive houses. Anyway, the roofs will be well above $ 30.000. So if you put the two products together (installation of panels and installation of solar roofs) you could indeed come at an average of $ 30.000.

3laine

At least in my area, the average is definitely closer to $30k than $10k, before the tax credit. Average installation size according to the “near me” map on the MySolarCity website is ~10.4 kW, which is going to cost $25k-$33k, probably, before tax credit.

Nelson

What would it take for Tesla to be considered a household electric utility company? I would like to replace my current electric utility company with 100% Tesla Power. I would gladly pay Tesla monthly for the electricity from their system.

NPNS! SBF!
Volt#671 + BoltEV + Model 3 (soon)

doggydogworld

This is a weak “analysis”, especially the $2.2b 2018 revenue forecast.

Tesla Energy has three parts:
Solar leasing: almost 500m/yr revenue, high gross margin (~35%), slow growth
Solar sales: roughly 600m/year revenue, low gross margin (<10%), no growth
Energy storage: ~140m 2017 revenue, negative gross margin, very high growth

Tesla says Energy storage will triple in 2018, so ~400m revenue. That puts 2018 revenue at 1.5 billion, not 2.2b. And if they can raise storage gross margin to 0% overall gross profit will be about 300m, not 500m.