Tesla's energy-storage division will pick up the slack when car margins and credits decline
Tesla's solar business and energy division will likely outshine its core business, which is struggling to keep up with the competition. This shows a certain amount of resilience as Tesla makes slow progress in its move to self-driving cars and robots. Elon Musk’s plans to create new robots and assembly lines are expected to cost Tesla $20 billion in this year. This will be the first time Tesla has had a negative cash flow quarter in two years.
Tesla's profitability is down from its peak. High-margin regulatory credit, which was once a major profit driver, has declined due to policy changes made in the United States by Elon Musk, Elon Musk's friend and ally. President Donald Trump. The energy sector is growing faster and more profitably than Tesla's aging lineup of cars. This is due to the demand for large-scale batteries to power data centres. The truth is that energy storage cushioned the blow, but it wasn't enough to offset the pressure of both the credit cliff (regulatory) and the erosion of automotive margins. "The trajectory is encouraging, but the current magnitude?is still inadequate," said Adrian Balfour founder and chairman Envorso. Wall Street estimates that the unit will generate revenue of?about $18,3 billion by 2026. This is up from $12.8 billion, and gross profit margins are expected to be near 29%.
About a fifth (or more) of the total revenue expected this year will come from the unit.
Analysts estimate that Tesla will report on the quarter after the markets close on the 22nd of April. The energy business is expected to grow by 25%, surpassing a 12% increase in automotive revenue as well as a 23% rise in services. The negative cash flow (or cash burn) is expected to reach $1.44 billion.
No More Side Business
Tesla's valuation of $1.5 trillion is based on products which do not yet exist. This includes robots and self-driving vehicles.
Even so, the quarterly sales of energy?division are still uneven.
Matt Britzman is a senior equity analyst at Hargreaves Lansdown and personally owns Tesla stock.
Energy storage deployments in the first quarter 2026 were 8,8 gigawatt hours, down 15% compared to a year ago. Tesla is expected to increase revenue in this segment as it focuses on more profitable products.
Scott Acheychek is the?COO at REX Financial, an ETF issuer.
Investors are interested in hearing how the energy industry is responding to challenges facing the entire industry. Morgan Stanley analysts stated that while growth is expected to continue beyond the first quarter, margins could be under pressure because of pricing competition and delays to pass on higher tariff costs.
(source: Reuters)
