The Q3 Tesla Energy numbers add credibility to the arguments that Megapacks will have strong margins for a while.
During the Q1 call, we heard that mid-20% gross margin was the target for energy storage and Tesla hoped to get there later this year. As of Q3, they already succeeded.
Zachary Kirkhorn
Sorry. Just one other thing I wanted to mention on [energy storage] margin. While we're not providing specific guidance there, I mean, just to set expectations of where we think this business will go in terms of margins, probably generally in the ballpark of what we've seen historically on the vehicle business. We generally look to mid-20% gross margins for any program that we launch. And so we're not there yet on this business, but that's what we're working towards.
Elon Musk
We're hopeful to get there later this year, but that's not a promise. That's an aspiration.
To simplify, I'll estimate that Tesla Solar broke even with revenue/cost at $50M in Q3 (about $1M per MW) and subtract that out.
Rev ($B) | $ 1.509 |
Cost ($B) | $ 1.128 |
Gross Margin % | 25.2% |
Storage deployed (GWh) | 4.0 |
Rev per kWh | $ 377 |
Cost per kWh | $ 282 |
Gross profit per kWh | $ 95 |
Based on the revenue per kWh being around $377, we can deduce that most of the volume was Megapacks, not Powerwalls.
Looking ahead, a downside is that Megapack price was cut in August by about 22%.
On the other hand, Tesla achieved this Q3 result with Lathrop still operating at partial capacity and while still learning how to mass produce Megapacks efficiently. Tesla also still has limited in-house LFP cell manufacturing. Consequently, it's reasonable to expect prices to continue dropping. Finally and crucially, we must remember that Megapacks make money not only on initial sale and installation, but also on recurring software and maintenance services that likely have better profit margins than the hardware itself.
Therefore, it's likely that Tesla can continue to maintain mid-20% margins as guided, if not somewhat better than that. This profitability expectation for the next few years is mostly a result of US federal government subsidies from the IRA. The customers are getting a 30% discount as a tax credit, and Tesla is getting manufacturing tax credits.