Tesla adheres to the fact that their non-automobile revenues are planned at the level of 50% of the company's long-term income. In 2019, there was a significant increase in their energy storage business, but the full potential was not realized. This was primarily due to the need to be distracted to meet the growing demand for Model 3.
The company hoped that this year the supply-demand equation would be balanced, but the lockdown in connection with COVID-19 put it at risk. However, Tesla, in its Shareholder's Letter for Q1 2020, reported that energy generation and storage revenue was $293 million. In addition, the company received 260 MWh storage deployed, which is 14% more compared to 1Q 2019. In 1Q 2020, Tesla directed resources to Model Y production, as well as the construction of production facilities in China, but this did not prevent the company from achieving better performance than in 1Q 2019.
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Tesla reported that Megapack, a battery pack of up to 3 MWh that is preassembled at Gigafactory Nevada as a single unit, is gaining traction. The company also saw a turning point in interest in storage facilities at the utilities level.
"We have seen an inflection point in interest for utility level storage, primarily driven by progress in reducing costs."
Tesla confirmed that the level of demand for this product remains above their capabilities. Projects that are currently under development have a high interest in Megapack.
"At the moment, the demand level for this product remains above our capacity. Our order book continues to expand due to multiple projects in the pipeline that are far bigger than our Hornsdale battery in South Australia which is still the largest Li-ion battery in the world."
This is due to the fact that renewable energy sources occupy an increasing share in the energy market, and the cost of batteries is falling. An increase in battery energy storage is an inevitable consequence of an increase in the use of renewable energy sources.
In 2020, Tesla will continue to expand several projects:
Tesla also reported an increase in cross-selling in the energy business, as more than 40% of customers using solar energy choose at least one Powerwall. In the first quarter, the company installed their 100,000th Powerwall.
Tesla has big plans for 2020, and their vertical integration and technological superiority give them an edge over their competitors.
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