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Tesla's Battery Keeps On Running

Apr. 05, 2022 6:00 AM ETTesla, Inc. (TSLA)RUN101 Comments
Juxtaposed Ideas profile picture
Juxtaposed Ideas


  • TSLA investors have been mostly focused on its EV and batteries segment while overlooking its solar ambitions.
  • TSLA is already certified as an official electricity retailer in Texas, with multiple residential & energy storage projects in the state.
  • TSLA is also planning multiple virtual power plant projects in Texas and California, with ongoing energy projects in Australia, the UK, and Germany.
  • Nonetheless, TSLA Energy is still in the early innings of its growth story, thus will not be reporting profitability just yet.
  • Moving forward, we may see a massive upside to TSLA Energy's growth, given that Elon Musk expected it to match the EV segment.

Hot Fiery Sun

aryos/E+ via Getty Images

Investment Thesis

Given Tesla (NASDAQ:TSLA) Energy's focus on market penetration opportunities, it has yet to report sustained profitability, despite being the second-largest solar installation company in the US. Sunrun Inc (RUN

This article was written by

Juxtaposed Ideas profile picture
I am a full-time analyst interested in a wide range of stocks. With my unique insights and knowledge, I hope to provide other investors with a contrasting view of my portfolio, given my particular background.Prior to Seeking Alpha, I worked as a professionally trained architect in a private architecture practice, with a focus on public and healthcare projects. My qualifications include:- Qualified Person with the Board of Architects, Singapore.- Master's in Architecture from the National University of Singapore.- Bachelor in Arts from the National University of Singapore.If you have any questions, feel free to reach out to me via a direct message on Seeking Alpha or leave a comment on one of my articles.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of TSLA either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (101)

riverside1993 profile picture
Grassroot resistance is rearing its head, it will only get worse as time goes by.

Scipio Advisors profile picture
@Juxtaposed Ideas

Thank you so much for the analysis. It seems that Tesla's Energy business will most likely play second fiddle to its all important EV business in the next few years. But that is OK, because success in EV will give Tesla the profit and scale to dominate in Energy later on.
Juxtaposed Ideas profile picture
@Scipio Advisors You are right! And once everyone realizes that EV users need to charge their vehicles at home, solar and energy storage systems will take off.
Scipio Advisors profile picture
@Juxtaposed Ideas In my model, Tesla's EV business can grow 30-45% CAGR til it reaches a volume of 20M (around 2030). The Energy business can then kick in sometime before 2030, giving another jump start to its revenue growth so that it remains a 40% grower.

If this scenario holds out, TSLA can be valued at between US$4-9 trillion by 2030.
@Scipio Advisors
"TSLA can be valued at between US$4-9 trillion by 2030."
I think you're being conservative.
But at least you're going in the right direction.
Sermer profile picture
It’s blatantly obvious that Tesla is going to dominate in many fields, bears just don’t want to admit it. Whatever. Their loss.

Long term, Tesla energy would probably rank as 2nd or 3rd out of the things I’m most excited about from TSLA. FSD is #1 with robits being #2. 2/3 is close but I see the robots as being longer term and less likely to happen.

It’s funny to me how many bears failed to see the potential back in the day and still refuse to open their eyes.
idaustin profile picture
Sounds a lot like Enron, sorry, Freudian slip, meant to say sounds a lot like Elon
Maxed Out Mama profile picture
@Juxtaposed Ideas

Energy & Storage is not a reason to buy Tesla. The problem is that the gross margins keep getting worse as they scale up. When a company is scaling and gross margins go negative, it's a reason to sell and not buy! Fortunately Tesla's Energy & Storage segment is not growing nearly as fast as Automotive, so Automotive plugs the P&L hole that Energy & Storage creates.

From 2019 to 2021, Energy & Storage revenues increased by 82.4% and gross margins dropped from 12.4% to -4.6%. That's a negative gross margin, and it is evidence that economies of scale are not working in Tesla's favor. You will note that in your comparison above, RUN's gross margins are positive.

But you keep repeating the "economy of scale" argument - an investing platitude that obviously does not apply here. Tesla manufactures little of the solar side, and they are buying LFP cells and assembling the battery storage. A very large amount of the cost involved on the solar side is the installation, and there Tesla seems to have a problem.

Tesla's sterling automotive performance and the stock dividend are more motivational, but at this price not motivational enough to me because I cannot see how Tesla ever grows into its current valuation.
@Maxed Out Mama As they iterate, margins can fluctuate. I would expect as they scale up, margins will improve. Margins here are generally low, so the fact that it is currently -5% doesn't worry me much. But economy of scale is a real thing, and I have no reason to believe that as they increase production their margins would get worse and worse- which is what you seem to be saying, but kind of flies in the face in the theory of economies of scale. And one down year doesn't mean we through that theory out.
Juxtaposed Ideas profile picture
@Maxed Out Mama @@WillLong Only time will tell. Given them a few years.
@Maxed Out Mama you don’t need to you can just keep posting here and watch. =)
And by "multiple residential & energy storage projects", we mean what, three?
Juxtaposed Ideas profile picture
@dickroylet You can sign up for Electrek, they provide a lot of in-depth info for TSLA's residential projects in Australia, in the US: California and multiple regions in Texas. Energy storage projects are in Australia and in the US: California & Texas.
Right now we hve a food shortage crisis in our lap. I see lots of acreage being taken up by these solar arays in and around the US. At what point should we worry about the abiity to grow food?
I love telsa as an investor but with all the solar projects there is one aspect of the truth folks inconveiniently ignore. It is taking up lots of land mass away from much needed food productions.
Gordonr profile picture
@Nick Kearney
That’s a non issue! Open rooftops are everywhere!
And a company called “Plenty” is addressing food shortage along with many others.
@Gordonr take a drive around my country side and you will see the problem more clear. i see what use to be teeming rows of corn, wheat, barly being turned into solar farms for states to the east not my own state which is what we need but others. not hardly any solar pannels on the roof tops anywhere near me because i live in tornado alley.
@Nick Kearney Take a flight and you will see it is not a problem. But yes, rooftop makes a lot of sense, especially in more dense sunny places liek California.
truwa profile picture
If one owns a house plus more than one EV then it will be insanity not to have solar + powerwall. The demand for solar and energy storage will just skyrocket in the coming years. Sell more EVs to increase demand for energy business. Brilliant.

Tesla is already working on virtual power plants using deployed powerwalls collectively with pilot applications in California and Australia. Yeah, each Tesla energy storage unit is "connected" like cars and Tesla can remotely manage them. This thing is going to be much bigger than even the wildest expectations.
@truwa I can not see it, EV's, Solar Panels on every house. They thought they could sell Electric cars by putting up charging stations before they even sold the cars. How did that work out for them?
truwa profile picture
@joeZen It is not a choice. If you own an EV, economics will make you go for solar plus powerwall whether you like it or not.
Juxtaposed Ideas profile picture
@truwa I agree. I feel the public charging EV are for when we are out and about / those living in apartments. Those on landed homes, can easily install solar & be energy independent for both the home usage and charging EV. I know I would if I do.
ckarabin profile picture
Negative 41% margins on solar installations? I love the interpretation: "it's in its nascent stage". How about: it's a lousy business!

I wonder if people actually calculate their cost of power off a rooftop solar system. You know, like a business would calculate it on honest accounting books. I know my grid electricity costs me 12 cents a KWH and no investment needed.
Eponymous One profile picture

So silly. I had a solar water heater on my roof back in the'70's. It was a collection of black water hose contained in a transparent box with a gravity feed connection to the storage tank in the house near the shower. No need to store propane. Worked good, lasted a long time.!
ckarabin profile picture
@Eponymous One Not surprising. Of course, you're a little more mechanically gifted than I am. But we had one out at my hunting cabin like that. Sure beat a cold shower. We never put plumbing in the cabin
Eponymous One profile picture

But you have a good sense of humor. Fortunately, we all have different talents!
Solar Investing profile picture
Solar + batteries are a match made in heaven and sre the future. Having said that I believe ENPH has the better technology. Both TSLA and ENPH should do very well as the world moves away from its fossil-fuel infrastructure and mindset. This will happen both for cost and environmental (global warming) reasons.
@Solar Investing
I was interested in a battery powered car back in the ‘80s. Heck, there were EVs in production in the late 1800s but cheap plentiful eco-friendly pumped oil was plentiful and cheap. So the oil won. Anyways, the EV industry will never kick the eco-friendly oil industry to the curb. Never.

Looking forward to the new EV Fighter Jet being contemplated by the Pentagon. 😂
Juxtaposed Ideas profile picture
@Solar Investing I agree! Though TSLA does not share much info on its solar, the company might just adopt ENPH's IQ8 moving forward!
evjohn profile picture
@Solar Investing exactly. PV + ST + EV not only can get rid of your monthly utility bill but also ALL trips to your fossil fuel station. Fuel replacement is actually more valuable than the electricity you displaced from your disconnect from the grid. Advantage PV and EV.
"TSLA is already certified as an official electricity retailer in Texas..."

Among all the 150 or so other electricity retailers......
Juxtaposed Ideas profile picture
@TaylorMill Amazing how the world has finally understood the importance of EV.
@TaylorMill I have thought this was first and foremost a play to manage their own needs for power in TX. Maybe there is more to it than I am thinking.
@Iflyvolaris "I have thought this was first and foremost a play to manage their own needs for power in TX. Maybe there is more to it than I am thinking."

Hard to say. Everything about Tesla as a retail provider is blown out of proportion IMO. Ultimately, battery storage will have a discharge cycle and such discharges will be dispositions that are likely to be classed as retail sales

First, the battery storage facility they already built is not that big. It is on the Texas-New Mexico Power distribution lines which serve a very small area in So Central Texas north of Corpus Christi but south of heavily populated areas nearer Houston. It is 100s of miles from either Austin or Boca Chica. In any case, discharges could possibly be used to hedge prices in far south Texas. Who knows. It's really trivial in any case

OTOH, and secondly, if they do build solar+battery storage on premises of the Austin factory then that conceivably can and/or will be used primarily for factory premise needs.
uptick_rule_now profile picture
We need for tesla to short circuit
@uptick_rule_now Your TSLA shorting is one continuous short circuit.
Gordonr profile picture
Why do you hate Tesla so much?
They’re a great American success story!
Owning Tesla stock is like buying the original 4 great stocks in the 1930s and holding . You would be in the same class as the wealthiest families out there . This is such a growth story I am running out of ink. By and hold for your grandchildren better yet the hell with that spend it all on yourself by then :)
@James Hanshaw Love it... don't you!!
" Love it... don't you!!"
He was duly warned. It may go down again before it goes way up. Again.
James... Tesla is on the way to becoming the most valuable company in the world. Really.
FlagFootballSaint profile picture
Batteries, batteries, batteries

If you own them you own the world.
r Negoro profile picture
Better focus on autos.
Juxtaposed Ideas profile picture
@r Negoro Unlikely, given how TSLA expects to spend up to $7B of CAPEX in FY2022 for the development of its Model S, Model X, Megapack, and Solar Roof. The latter 2 are key to its VPP venture in Texas and California.

Page 33

PancakeWednesday profile picture
@r Negoro They can do both (and more). They have plenty of cash on hand and Auto is going fantastically.

Multiple teams working in parallel too of course.
Juxtaposed Ideas profile picture
@PancakeWednesday I agree! They work beautifully together
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