Tesla's fastest-growing business has stalled!

This year, one of Tesla's strongest growing businesses, the energy storage business, has cooled down, with installed capacity declining for two consecutive quarters.

Tesla's latest data shows that the once-highlighted business—energy storage products (Powerwall and Megapack)—has seen a decline in installed capacity for two consecutive quarters.

In the second quarter of this year, Tesla's total energy storage installation was 9.6 gigawatt-hours, a decrease of 0.8 gigawatt-hours from the first quarter, and also lower than the peak of 11 gigawatt-hours reached in the fourth quarter of last year. For the entire year of 2024, Tesla's total installed capacity of energy storage products is expected to reach 31.4 gigawatt-hours.

Previously, the energy storage business had been growing year after year, consistently being a major highlight for Tesla outside of its automotive sector. Tesla's revenue from energy storage and solar business grew from $2 billion in 2020 to $10.1 billion last year, multiplying several times in just a few years. According to a previous article from Wall Street Insight, Tesla's energy production and storage revenue in the first quarter was $2.638 billion, a year-on-year increase of 67%, and a year-on-year increase of 113% in the fourth quarter of last year.

However, this growth momentum has shown signs of cracking, with the growth rate of battery storage deployment slowing down, bringing new warnings to Tesla's overall performance.

On Thursday, Tesla's stock price rose over 1% in pre-market trading.

Global Energy Storage Market's High Growth Difficult to Sustain

The global energy storage market achieved rapid growth in the first quarter. According to consulting firm Wood Mackenzie, the global new energy storage installations reached a historical high in the first quarter of this year, increasing by 57% year-on-year.

However, analysts warn that such high growth may be difficult to maintain in the long term due to two major challenges. First, tariff pressures are rising, as the U.S. is increasing tariff barriers on imported batteries and components, which may affect the overall project economics.

Second, there is uncertainty regarding policy support. Republican members of the U.S. Congress are working to repeal key parts of the Inflation Reduction Act. Some of the support policies for new energy and energy storage established during the Biden administration may be cut.

Even if these battery storage projects still qualify for tax credits, new legislation may impose "Foreign Entity of Concern" (FEOC) restrictions, requiring that key raw materials not come from designated countries. The reality is that many minerals required for batteries are refined or processed in these countries, meaning that most projects will struggle to meet the requirements, and subsidy eligibility may be "stuck."