Tesla’s energy division was the lone bright spot in an otherwise challenging first quarter. The division’s revenue increased by 67% to $2.7 billion, while gross profit rose 82% year-over-year to $690 million.
Key Highlights
- The energy and storage segment posted a 67% increase in revenue to $2.7 billion
- Gross profit for the segment rose 82% year-over-year to $690 million
- The segment’s gross margins were 29%, helping to boost the company’s margins to 16.3%
- Deployments reached 10.4 GWh, up 156% year-over-year
Challenges Ahead
Despite the success, Tesla’s CFO, Vaibhav Taneja, warned of significant headwinds due to tariffs imposed on China. The company sources LFP battery cells from China, which will be impacted by the tariffs. Taneja stated that the company is working to commission equipment for local manufacturing of LFP battery cells in the US and secure additional supply from non-China-based suppliers, but this will take time.
Impact on Future Plans
The tariffs may impact Tesla’s forecasted 50% surge in energy storage deployments for 2025. The company had launched its first megafactory outside the US in Shanghai earlier this year, with a focus on producing energy storage products. However, the new tariffs have already disrupted those plans, throwing a wrench into the company’s international expansion strategy.
CEO’s Stance on Tariffs
Tesla CEO Elon Musk has been an outspoken critic of tariffs, citing their negative impact on Tesla’s operations. He has made personal appeals to President Donald Trump to reconsider the policy.
Stock Performance
Tesla stock was up 4.6% during the regular session on Tuesday, closing at $237.97 a share. Following the first quarter earnings release, the stock is up 5.39% in after-hours trading.
Conclusion
While Tesla’s energy division was a bright spot in the first quarter, the company faces significant challenges ahead due to the tariffs imposed on China. The impact of the tariffs on the energy business will be substantial, and it will take time for the company to adjust to the new reality.