Tesla energy unit rises as EV margins fall

Tesla is increasingly relying on its fast-growing energy division to support profits, as pressure mounts on its core electric vehicle business.

The shift comes ahead of the company’s quarterly earnings, where analysts expect its energy storage segment to emerge as a major growth engine, News.Az reports, citing Reuters.

While Tesla remains best known for its electric cars, its solar and battery storage operations are now expanding more rapidly—and delivering stronger margins.

Demand for large-scale battery systems, especially those powering data centers, has helped the division become roughly twice as profitable as Tesla’s aging vehicle lineup.

Products like the Megapack are driving this growth, as the company focuses more on large, utility-scale projects rather than smaller residential systems.

Tesla’s automotive division is facing a tougher environment. Profit margins have declined from earlier highs, while regulatory credits—once a significant source of income—are fading due to policy changes in the United States.

CEO Elon Musk is also investing heavily in future technologies such as robotics and self-driving systems. These efforts are expected to cost around $20 billion this year and could push Tesla into negative cash flow for the first time in two years.

Wall Street estimates suggest Tesla’s energy unit could generate about $18 billion in revenue in 2026, up sharply from the previous year, with solid profit margins near 30%.

However, analysts caution that while the energy division is helping offset losses elsewhere, it is not yet large enough to fully compensate for declining vehicle profitability and reduced regulatory credits.

For the upcoming earnings report, analysts expect:

Energy business growth of around 25%
Automotive revenue growth of about 12%
Continued pressure on overall cash flow

Despite strong long-term potential, the energy segment remains uneven quarter to quarter, making it harder to predict short-term performance.

Tesla’s long-term valuation still depends heavily on future projects like autonomous vehicles and robots—technologies that are not yet fully realized.

In the meantime, its energy storage division is becoming more than just a side business. As competition intensifies in the EV market, Tesla’s ability to scale its energy operations could play a crucial role in stabilizing its financial performance.

News.Az 

By Aysel Mammadzada