What is Tesla's Megapack Business Worth?

Evaluating its independent market value as a large-scale energy storage business

SETTING THE STAGE

Let’s kick this off with a quote from Elon Musk a few weeks back:

“Battery production is expanding at a rate several times faster than vehicle production, almost 10x the rate of vehicle production.” Elon Musk 2024

This surge in battery production is due to the massive demand for batteries as the world increases its use of electricity. Musk also pointed out the potential for more efficient grid use with energy buffering. Currently, electrical grids are designed to accommodate peak power output with no energy storage, leading to inefficiency. On hot summer days, when energy use peaks, the grid must support this maximum demand. However, at night, the demand can drop to as low as one-tenth of the peak. By buffering energy, there's an opportunity to better utilize the grid's capacity, making it more efficient and reducing waste.

The Goal

This paper aims to uncover the standalone financial valuation of Tesla's Megapack Energy Storage business for Q1 2024, a segment previously uncharted in financial analyses. I decided to come up with an evaluation to determine its worth, leveraging data on production efficiency, unit sales, and profit margins.

Introduction

The energy storage sector is at the forefront of the renewable energy transition, offering solutions to some of the most pressing challenges faced by the energy industry today. Tesla's Megapack, is the leading product in this space, represents a significant portion of the company's value proposition. This paper seeks to quantify that value based on Q1 2024's performance and future growth expectations.

MegaPack MindMap

This mindmap is the building block and justification for my valuation model below.

Q1 PRODUCTION

In Q1, Tesla deployed 4,053 MWh of capacity. We will break this down and it shows continued ramp.