TLDRs:

Tesla’s energy storage deployments declined for the second quarter in a row, down to 9.6 GWh.
The division, once a reliable growth engine, now shows signs of weakening momentum.
Policy risks and tariffs are raising costs and complicating future tax credit eligibility.
Despite strong long-term demand, Tesla’s energy unit may face near-term headwinds.

Tesla’s energy storage business, once hailed as a promising counterbalance to its volatile automotive division, is showing signs of strain.

For the second straight quarter, Tesla reported a decline in deployments of its flagship stationary storage products, the Powerwall and Megapack. The latest figures show the company installed 9.6 gigawatt-hours (GWh) of energy storage in the second quarter of 2025, slipping from 10.4 GWh in the first quarter and falling further from its record high of 11 GWh in Q4 of 2024.

The back-to-back drop raises questions about the stability of what has long been considered Tesla’s most reliable growth engine outside its core vehicle business. After nearly doubling energy storage deployments in 2024 and pushing revenue from the energy division to $10.1 billion, this recent stumble suggests the momentum may be cooling.

Tesla’s energy business has historically been one of the few consistent bright spots on its earnings sheet. Between 2020 and 2024, revenue from energy generation and storage surged fivefold, helping offset occasional slumps in car sales and production delays. But the latest figures, released alongside the company’s second-quarter financial disclosures, indicate the division may now be succumbing to the broader headwinds affecting Tesla as a whole.

Growth momentum loses steam

Tesla’s energy storage surge in 2024 was driven largely by soaring demand for grid-scale battery solutions, particularly the Megapack. These installations, designed for utilities and data centers, helped push Tesla’s energy gross profit to $2.6 billion last year.

The company also expanded production capacity with the opening of a new Megapack factory in Shanghai, meant to supplement its existing Lathrop, California, plant.

But that momentum has slowed. While Q1 2025 saw a 154% year-over-year jump in deployments, Q2’s results tell a different story. The 0.8 GWh quarter-over-quarter decline may not sound dramatic, but it breaks a streak of consistent growth and comes amid a backdrop of rising uncertainty for clean energy projects.

Policy uncertainty weighs on outlook

Analysts point to policy risks as one of the main culprits. Tariffs on Chinese-made components, combined with Republican-led efforts to dismantle parts of the Inflation Reduction Act, are already creating complications for companies like Tesla. While some battery installations may still qualify for tax credits, new sourcing restrictions on materials from foreign entities of concern, especially China, could make those incentives difficult to claim.

China remains a dominant player in the battery materials supply chain. From lithium processing to cobalt refinement, the country’s grip on the sector makes it nearly impossible for companies to completely avoid sourcing from Chinese suppliers. As new rules tighten, Tesla’s cost structure for energy products could come under pressure, complicating its ability to compete and expand.

Still a long-term asset, but questions loom

Tesla’s leadership has maintained that its energy business remains a critical pillar of long-term growth. Demand from artificial intelligence infrastructure and growing needs for grid stability are expected to keep interest in battery storage high. But investors are now facing a more nuanced picture, one where short-term pressures may delay the realization of that potential.

The question for Tesla going forward is whether it can weather these headwinds without losing its edge in a space that is rapidly attracting more competition. For now, the once-dependable energy division is facing the same turbulence that has recently rattled Tesla’s vehicle business, casting doubt on its role as a stabilizing force.

The post Tesla’s Once-Reliable Energy Business Falters for Second Straight Quarter appeared first on CoinCentral.

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Filed under: News - @ July 2, 2025 10:26 pm