CITIC SEC: Energy transformation stimulates demand for energy storage, Shanghai energy storage factory to increase production soon.
24/01/2025
GMT Eight
CITIC SEC released a research report stating that the price reduction of energy storage systems will drive a global surge in demand for large-scale energy storage, with significant increases in energy storage deployment in the United States, Europe, the Middle East, and other regions by 2025. Due to its brand recognition and strong software capabilities, Tesla is competitive in the energy storage industry. In 2024 Q4, Tesla's quarterly energy storage deliveries reached 11GWh, with production capacity becoming the largest constraint. The upcoming production of the Shanghai energy storage factory in 2025 Q1 is the biggest marginal change, and production capacity is expected to exceed expectations. Additionally, the Shanghai energy storage factory will lower the cost of Megapack, driving further growth in delivery volumes.
Tesla Energy: Transitioning focus to Megapack in the photovoltaic + energy storage product system.
Initially positioned as an automotive manufacturer, Tesla launched its home energy products in 2015 and acquired solar manufacturer SolarCity in 2016 to enhance its energy business capabilities. The company's products mainly include home solar, home energy storage Powerwall, and large-scale energy storage Megapack. Financially, the energy business revenue has maintained over 50% growth for two consecutive quarters, with a gross profit margin exceeding 30%, surpassing the automotive business. With senior management in the energy business, a Megapack director was promoted to head the energy business, highlighting the company's emphasis on the Megapack product and its potential to further develop the business.
The vertical integration of hardware and software enhances Megapack's product strength while maintaining its position as the global market leader with high premiums.
Referencing Tesla's official website for Megapack pricing, SeekingAlpha Industry Research and Wood Mackenzie data, Tesla's Megapack has achieved the leading market share of global energy storage integrators at 2.5 times the price of domestic energy storage systems by 2023, with a continuously high gross profit margin.
1) Why is the market share the highest? a. Product strength: Tesla's early product design was innovative, with high levels of modular integration and small footprint. Although domestic manufacturers have rapidly caught up with multiple iterations, their hardware advantages are not as pronounced; b. Brand power: Tesla's brand power from its automotive business helps Megapack, which offers a 20-year warranty, gain trust from overseas customers more easily; c. Strong software capabilities: Autobidder significantly increases energy project revenue and shortens payback periods.
2) Why is the gross profit margin high? a. Lower material costs: Delivery of products is delayed by about a year, and high-price orders delayed to delivery enjoy high gross margins. With the stabilization of lithium carbonate prices, the gradual increase in gross profit margin from materials is expected to weaken; b. Economies of scale: The Lathrop factory in California has steadily increased production capacity since 2023, significantly expanding energy storage deployment and improving gross profit margins.
Marginal change: The Shanghai factory is set to start production, potentially resolving production capacity constraints.
In 2024 Q4, energy storage deployment reached approximately 11GWh, reaching the production capacity limit of the Lathrop factory in California.
1) Demand side: The price reduction of energy storage systems will lead to storage reaching price parity, and overseas energy storage is expected to surge in 2025. Long-term global energy storage demand is expected to reach close to 900GWh, with a compound growth rate of 30%. The sustained increase in demand will significantly boost the demand for Megapack products;
2) Supply side: The construction of the Shanghai factory is almost complete, moving into the trial production stage for Megapack. It is anticipated to gradually increase production in 2025 and operate at full capacity in 2026. In the long term, Tesla will further increase production capacity through capacity upgrades and Phase 2 expansion to meet the continuously surging demand;
3) Profit side: The Shanghai factory will reduce costs for Megapack. According to estimates, assuming a 20% reduction in major costs and no price cuts, the corresponding gross profit margin would be 41%. Even at a 30% gross profit margin level, Megapack still has a 16% reduction in cost potential.