Deliveries surge but gross profit margin declines, Musk explains the value of Tesla energy storage in detail
After Tesla recently announced a second-quarter financial report with revenue hitting a new high for the same period, the capital market did not respond positively. From the perspective of revenue performance, the single-quarter revenue of 28.236 billion US dollars, a year-on-year increase of 26%, is considered qualified. However, because earnings per share were lower than market expectations and free cash flow turned negative for the first time in recent years, Tesla's stock price continued to fall after the financial report was released. As of the close of July 25, Tesla closed at $313.03, a cumulative decline of nearly 18% this week. However, growth in the energy business was the highlight of Tesla's second quarter.
After Tesla recently announced a second-quarter financial report with revenue hitting a new high for the same period, the capital market did not respond positively. From the perspective of revenue performance, the single-quarter revenue of 28.236 billion US dollars, a year-on-year increase of 26%, is considered qualified. However, because earnings per share were lower than market expectations and free cash flow turned negative for the first time in recent years, Tesla's stock price continued to fall after the financial report was released. As of the close of July 25, Tesla closed at $313.03, a cumulative decline of nearly 18% this week. However, growth in the energy business was the highlight of Tesla's second quarter. According to the financial report, Tesla’s energy storage shipments in the second quarter were 13.5GWh, an increase of 53% from the previous quarter, which was the second-highest single-quarter shipment in the company’s history. According to a reporter from 21st Century Business Herald, as one of Tesla's most important energy storage production bases, its Shanghai Energy Storage Gigafactory reached a record high in output in the second quarter, driving the energy storage installed capacity in the EMEA market (Middle East, Africa and Europe) to a record high. It is worth mentioning that the Shanghai Energy Storage Super Factory is still continuing to ramp up its production capacity. The new energy storage super factory in Texas is nearing completion, and is scheduled to start producing the third-generation Megapack and Megablock energy storage systems this year. At this point, including the production capacity of the California factory and the Shanghai factory, Tesla has deployed more than 100GWh of energy storage capacity. Energy storage is Tesla's key investment area, and the company hopes that this business can bring new incremental performance. It should be pointed out that although Tesla's shipments increased significantly year-on-year in the second quarter, its energy storage business gross profit margin declined. The financial report shows that during the reporting period, the gross profit margin of Tesla's energy business dropped to 20.4% from 39.5% in the same period last year, almost halving, which directly led to a further decline in the company's overall gross profit margin during the same period. Multiple factors led to the decline in profitability of Tesla's energy storage business in the second quarter of this year. First, a US$240 million warranty reserve was set aside to deal with battery cell failures in early-delivered energy storage equipment; second, the tariff concessions of more than US$200 million in the first quarter will no longer be extended in the second quarter; third, competition on the industrial-grade energy storage track has intensified, and the average price of products continues to decline. Based on the continued impact of the above reasons on subsequent business, Tesla management expects that in the long term, the steady-state gross profit margin center of the company's energy storage business will remain in the mid-to-low range of 20%. "Currently, we have sufficient reserves of energy storage orders and are simultaneously delivering existing orders, while meeting the incremental demand generated by the electrification of data centers and society as a whole." Tesla Chief Financial Officer Vaibhav Taneja mentioned. According to Tesla CEO Elon Musk, the energy storage business will also become a key support for Tesla’s large-scale deployment of AI data centers in the future. "In the future, the electrification of transportation and the artificial intelligence industry will generate massive power demand, and photovoltaic energy storage combinations will become an urgent need. We are advancing the largest advanced infrastructure and manufacturing capacity expansion plan in human history, which is of great significance." Musk said at the earnings call that Tesla's third-generation Megapack energy storage equipment will be put into production soon. The lithium refinery and cathode material refinery have also been put into operation. The cell production capacity continues to increase, and the construction of large-scale solar cell and component production lines is also being prepared. "The current demand for energy storage is not only for peak shaving, but also for grid balancing - to provide peak-shaving support for wind power and photovoltaic power generation. The combination of solar energy and energy storage will become the production method of most of the world's energy in the future, which is also the power supply method of satellites - solar panels plus batteries." Musk said.
When talking about the importance of energy storage for the development of AI, Musk used the procurement case of SpaceX as an example: "The demand for AI computing power is extremely strong. Even 'super-large-scale' cloud service providers are faced with difficulties in starting up and finding power, and it is even more difficult to deal with large power fluctuations during training. During the operation of training tasks, power consumption may plummet by 70% within 100 milliseconds, requiring rapid response, first This is the core reason why SpaceX purchases a large number of Megapacks for the data center - mainly to smooth the power fluctuations during training, and also to help apply for more power from the power grid and inform the power company that there is no need to guarantee power supply during peak power periods, because the battery can take over, which greatly reduces the power supply pressure of the power company."
When talking about the importance of energy storage for the development of AI, Musk used the procurement case of SpaceX as an example: "The demand for AI computing power is extremely strong. Even 'super-large-scale' cloud service providers are faced with difficulties in starting up and finding power, and it is even more difficult to deal with large power fluctuations during training. During the operation of training tasks, power consumption may plummet by 70% within 100 milliseconds, requiring rapid response, first This is the core reason why SpaceX purchases a large number of Megapacks for the data center - mainly to smooth the power fluctuations during training, and also to help apply for more power from the power grid and inform the power company that there is no need to guarantee power supply during peak power periods, because the battery can take over, which greatly reduces the power supply pressure of the power company."