In a recent YouTube video by The Electric Viking, an observation was made about Tesla’s financials, specifically focusing on the remarkable profit surge within its energy storage division. Here’s the full story.
The Surge in Profits
The key revelation from the video revolves around Tesla’s lowest-ever cost per car manufactured in the fourth quarter of 2023. Despite this achievement, the profits from car sales were not as substantial as one might expect, primarily because Tesla strategically priced its vehicles lower than the competition, aiming to secure a more extensive market share globally. However, the real financial triumph lies in Tesla’s energy storage division, which the video host, Sam, claims nearly quadrupled its profits in 2023.
Ongoing Revenue Streams
Sam shared that Tesla’s energy storage division operates similarly to a subscription-based model. Unlike traditional car sales where profits are generated from a one-time transaction, Tesla’s energy division establishes ongoing revenue streams through its virtual power plants and mega batteries deployed globally.
The unique proposition of Tesla’s energy storage lies in its ability to offer software-based solutions to consumers. Rather than just selling batteries, Tesla often leases the software, creating a continuous revenue stream.
Subscription-Based Model
Sam highlighted that Tesla operates virtual power plants, allowing consumers to sign up, use Tesla’s batteries, make money, and in turn, contribute to Tesla’s profits. This software-based approach, like Netflix’s subscription model, presents an innovative way for Tesla to capitalize on the growing demand for sustainable energy solutions.
Sam also touched on the arbitrage strategy used by Tesla, particularly with its mega batteries worldwide. Tesla charges premium prices for its services, positioning itself as a leader in the energy storage market. Sam also contended that Tesla’s success in securing contracts for mega batteries, even at higher prices, stems from the reliability and efficiency of its software.
The Reasons Behind the Profits
Tesla’s software, according to the video, enables the displacement of traditional power plants, contributing to significant profits for both Tesla and the energy companies involved. The financial success of Tesla’s energy storage division becomes evident in the claim that profits nearly quadrupled in 2023.
Sam attributed this remarkable growth to the deployment of energy storage, which more than doubled during this period, reaching 14.7 GW hours.
The Challenges
While Sam highlighted the success of Tesla’s energy storage division, he also acknowledged the challenges faced by the solar energy sector.
Solar deployments experienced a decline in both sequential and year-over-year figures, attributed to factors such as high interest rates and seasonal weaknesses. Sam suggested that Tesla might shift its emphasis away from solar, given the global challenges faced by the solar industry, particularly with the decline in panel prices.
A Win for the Planet
Sam concluded and said, “Here’s the thing, solar will disappear at Tesla but energy deployments and you could call them energy subscriptions will continue to rise. That’s a win for consumers, it’s a win for Tesla, and to be honest it’s a win for the planet.”
Several YouTube users also shared their thoughts on the video.
One user wrote, “Tesla is engaged in lots of markets with potential and they build good cars. Keep it up and someday, in the distant future, they’ll grow into their ridiculous P/E ratio.”
Another user commented, “Tesla has almost no debt and has developed its business software to run the company so it doesn’t have the IT expense other companies do. I wonder if other automakers declare how much they lost servicing their debt.”
So what are your thoughts? Do you believe Tesla’s innovative approach to energy storage and software subscriptions represents a blueprint for the future of sustainable energy solutions, and how might it impact the energy industry?
