Tesla CEO Elon Musk is fond of saying that the company’s energy business – built around battery storage and solar – is going to be worth as much as the company’s electric car business, based on the sheer scale of the transformation needed to reach net zero emissions as soon as possible.
That may well be the case one day, but right now the overwhelming majority of the company’s $US25 billion in annual revenues comes from the sale of electric cars and associated software directly to consumers, along with the sale of credits to other car makers struggling to meet fuel efficiency targets.
For the first time, however, analysts has crunched the numbers of the energy business in detail, and come up with a stunning valuation of $A18 billion – largely based around the estimates of sales and margins from the battery storage component. To put this in context, that’s more than the combined value of Australia’s two biggest energy utilities – AGL and Origin.
But Morgan Stanley says Tesla Energy might be worth more than three times that much ($A60 billion) based on its bull case scenario that assumes 20 per cent compound growth rates and a profit margin of around 30 per cent by 2030.
(See our story on our sister site The Driven on how Morgan Stanley values the whole business – from a base case of $A720 billion to a bull case valuation of $A1.4 trillion).
The base case valuation is centred on forecasts that Tesla’s revenues from its energy division will be in the range of around $US1.8 billion in 2020, and will grow to $US4 billion by 2025, $US7.4 billion in 2030 and to more than $US20 billion by 2040.
According to Morgan Stanley, Tesla will deploy – in its base case scenario – nearly 180MW of solar in 2020 (mostly from its purchase of Solar City) and 2.1GWh of storage, including utility scale Megapacks, power packs and the home-sized Powerwall batteries.
It estimates gross margin for the combined Tesla Energy business averaged just over 12 per cent for 2018 and 2019, but dipped significantly in 2020 due to COVID-19 disruption.
It estimates that deployment will increase to around 600MW of solar a year by 2030, and 11.8GWh of battery storage, and then to 1.5GW of solar and 20GWh a year of battery storage by 2040, by which time the gross margin will have risen to around 25 per cent.
(Note: An earlier version incorrectly mentioned Sunrun instead of Solar City as Tesla solar purchase).