Tesla’s growing energy business surpasses Musk’s elusive artificial intelligence dreams
By financial metrics, Tesla is still a car company. However, CEO Elon Musk continues to plan the company’s future around self-driving technology and humanoid robots. But the company’s most promising division right now has nothing to do with cars or artificial intelligence
It’s easy to overlook Tesla’s energy generation and storage business, which still accounts for only a small portion of the company’s total revenue. But this share has been growing. According to Tesla’s third-quarter financial report released yesterday (October 22), the energy division currently accounts for 12% of Tesla’s total sales. The energy sector’s share of total revenue has doubled since 2023.
The energy division is also growing much faster than Tesla’s other businesses. Between July and September, the segment’s revenue reached $3.4 billion, a year-on-year increase of 44%. By comparison, Tesla’s electric vehicle sales rose just 6% to $21.2 billion in the quarter, while other revenue sources rose 25% to $3.4 billion.
Affected by tariffs and falling car prices, Tesla’s third-quarter profit plummeted 37% to $1.4 billion. Total revenue rose 12% to $28 billion, driven by a surge in vehicle sales ahead of the expiration of the electric vehicle tax credit.
Globally, Tesla’s market share is also declining. Data from the European Automobile Manufacturers Association shows that EU registrations fell by 43% in the first eight months of 2025 compared with last year. Shipments from Tesla’s Shanghai Gigafactory, which mainly supplies the Asian market, have seen the same decline this year.
Rather than address electric vehicle sales, Musk used his earnings call yesterday to talk about his vision for self-driving technology and robots. “I think people just don’t quite understand how far this is going to go – it’s going to be like a shock wave, honestly,” he told analysts.
Musk has long made overly ambitious promises about self-driving cars, predicting that Tesla’s robotaxis will be operating in eight to 10 cities by the end of 2025 and claiming that Optimus robots will eventually perform tasks on par with surgeons. But for now, this vision is far from reality.
Taking off is Tesla’s energy division, which sells Powerwall and Megapack battery systems. Earlier this month, the company reported that it deployed 12.5 GWh of storage products in the July-September quarter, up more than 80% from last year, as energy demand surges as artificial intelligence infrastructure booms. One of the unit’s major customers is Musk’s artificial intelligence startup xAI, which spent about $191 million on Megapack products in 2024 and nearly $37 million as of February this year.
“Demand for Megapack and Powerwall will remain very strong next year,” Michael Snyder, Tesla’s vice president of energy and charging, told analysts yesterday. “We’re seeing significant growth in demand for artificial intelligence and data center applications.”
The unit also produces solar panels for residential use, with growing demand across the United States. Snyder announced that Tesla will begin shipping new domestically produced panels in early 2025.
The growth in Tesla’s energy business is even more remarkable given the impact of the Trump administration’s tariff policies. Tesla said its electric vehicle and energy division incurred more than $400 million in tariff-related costs in the third quarter. The impact should ease as Tesla’s Shanghai factory ramps up production to meet non-U.S. energy demand, the company said.
Musk said the energy sector’s profitability will only increase as the boom in artificial intelligence drives soaring power demand that traditional power plants can’t meet. He described Tesla’s energy products as a way to double energy output without the delays and regulatory hurdles of building new facilities. “We see the potential for Tesla battery packs to significantly increase the annual energy output of any given grid (U.S. or other country),” he said.
