Wolfe takes a closer look at Tesla’s energy business

Investing.com -- Wolfe Research remains bullish on Tesla’s energy business, highlighting recent innovations that could accelerate growth in the coming years.

While Tesla’s automotive operations and AI/autonomy ambitions often dominate investor attention, Wolfe Research said its energy segment “has grown rapidly in recent years and is their most profitable segment (est 2025e revs up 31% to $13.2 bn, with ~29% Gross Margin).”

The firm noted that utility-grade energy storage, led by Tesla’s Megapack line, has seen deployments soar from roughly 1 GWh in 2020 to 30 GWh today.

Wolfe Research noted that the company’s latest Megapack 3 system “offers up to 5.0 MWh of usable energy, up vs 3.9 MWh for the current offering,” demonstrating significant improvements in energy density despite similar overall weight.

The analysts explained that the new Megapack leverages innovations from Tesla’s vehicles, including SiC inverters used in the Model 3 and Model Y, a scaled-up heat pump, and 2.8-liter prismatic battery cells developed with Tesla’s battery team.

Production is slated to begin in 2026 at Tesla’s Houston facility, targeting 50 GWh of capacity. Wolfe Research estimates Megapack 3 could lower costs by 15%–20%, reducing COGS to approximately $130–140/kWh from $160–170/kWh for the current Megapack.

Tesla is also focusing on accelerating commissioning and cutting construction costs. The company unveiled the Megablock, a 20 GWh system that integrates multiple Megapacks with Tesla’s in-house transformer, eliminating above-ground cabling.

Wolfe Research said this configuration achieves “23% faster installation vs existing battery storage solutions, with 40% lower construction costs.”

Overall, Wolfe Research concluded that Tesla’s energy innovations “could support even faster growth over the next several years,” as the company expands its total addressable market and capitalizes on competitive advantages in utility-scale storage.

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