Tesla (NASDAQ:TSLA) CEO Elon Musk’s update on the electric-car maker’s business on Tuesday afternoon at the company’s annual shareholder meeting obviously impressed investors. The stock surged higher on Wednesday, finishing the trading day up nearly 10%.
For the most part, headlines after the meeting seemed focused on Musk confirming that the automaker is on track with its production and profitability plans. Of course, there’s good reason to believe the news that Tesla is on track to achieve a production rate for its Model 3 of 5,000 units per week by the end of June and GAAP profitability in both Q3 and Q4. Production delays have previously plagued the Model 3 as Tesla attempts to transform into a mass-market auto company, which has weighed on profitability. But another narrative discussed during the shareholder meeting is worth examining: Tesla’s surging energy storage business.
What Musk said about Tesla’s energy storage business
Musk was extremely optimistic about Tesla’s energy storage business, implying energy storage sales will see wild growth at rates that exceed the sharp growth in Tesla’s vehicles sales.
Launched just three years ago, its energy storage business has already swelled to a total of 1 gigawatt-hours of energy storage deployments globally as of May, Musk said during the shareholder meeting. He also said he expects that in “less than a year from now” Tesla will deploy another GWh of energy storage.
But this is just the beginning, according to Musk. “I think for many years to come, each incremental year will be about as much as all of the preceding years [in terms of energy storage deployments],” the CEO predicted.
Furthermore, he said deployments are ultimately limited by production, which is notable since Tesla’s Gigafactory has morphed into the world’s highest-volume battery factory when measured by battery capacity output.
Musk put the extraordinary demand for energy storage and the scale of the Gigafactory’s output into perspective:
We would actually be able to do more if we could produce more. And we are producing a lot of batteries. So in fact, next quarter, at the Gigafactory, we expect to make more battery capacity than all other EVs combined worldwide, including China. So I mean, this is a really crazy amount of batteries. This one factory is making — will make more than all the other factories on earth…
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