Tesla's Energy & Storage Unit is Thriving: Is it the Only Bright Spot?

Tesla’s TSLA core electric vehicle (EV) business is under pressure as weakening demand and stiff competition are weighing on sales. CEO Elon Musk’s political involvement is also working against Tesla’s brand image. The company has pinned hopes on its AI and robotaxi strides, which it believes will be the key long-term drivers. But these are still in the early stages.

However, one segment that is flourishing is Tesla’s energy and storage business, thanks to the strong reception of its Megapack and Powerwall products — lithium-ion battery energy storage products. Powerwall is designed to store energy for homes and small commercial facilities, while Megapack serves larger-scale energy needs for commercial, industrial and utility customers.

Over the past three years, energy storage deployments have surged at a CAGR of 180%. In 2024 alone, deployments soared 113% year over year, driven largely by the expansion efforts at the Mega factory in Lathrop, CA. With ongoing efforts to ramp up production at the Megapack factory to meet escalating demand, deployments are expected to continue their upward trajectory. In Q1 2025, Tesla deployed 10.4 GWh of energy storage, up 156% year over year. Musk expects deployments in 2025 to increase another 50% at least.

Financially, the segment is now one of Tesla’s strongest. The Energy Generation and Storage division boasts the highest gross margins among all Tesla segments — 26% in 2024 — thanks to relatively low material and operating costs. As Tesla is currently battling several challenges, this fast-growing, high-margin unit remains a pillar of strength.

TSLA’s Competitors in This Space

Fluence Energy FLNC and Enphase Energy ENPH are key competitors to Tesla’s energy and storage business.

Virginia-based Fluence is among the global leaders in utility-scale energy storage and a key competitor to Tesla’s Megapack. Operating in a rapidly growing sector driven by the shift to renewables, Fluence offers advanced battery systems, AI-driven software and grid services to major utilities and developers worldwide. Fluence’s new Smartstack platform, set for launch in late 2025, and partnership with Cordelio Power to deploy 1 GWh of domestically manufactured battery storagewillfurther strengthen its market position.

Fremont-based Enphase manufactures and sells home energy solutions that connect energy generation, energy storage and control and communications management on a single intelligent platform. Enphase competes more closely with Tesla’s Powerwall in the residential energy storage space. Known for its solar microinverters, Enphase has expanded into home battery systems, offering integrated solar-plus-storage solutions that help homeowners reduce reliance on the grid and manage energy usage efficiently.

TSLA’s Price Performance, Valuation and Estimates

Shares of Tesla have lost around 42% year to date compared with the industry’s decline of 37.5%.

From a valuation standpoint, TSLA trades at a forward price-to-sales ratio of 6.82, above the industry. It carries a Value Score of F.

The Zacks Consensus Estimate for TSLA’s earnings has been southbound over the past 30 days.

Tesla stock currently carries a Zacks Rank #3 (Hold).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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