Tesla’s Q2 Earnings Call: Key Battery Industry Takeaways

Tesla's Q2 2024 earnings report was wide-ranging, as Elon Musk continues to position the company as less an electric vehicle (EV) maker and more a developer of AI, self-driving cars, and mass-produced Optimus robots.

But along with all of that were updates of particular interest to the battery industry. The company highlighted significant progress in energy storage, advancements in 4680 battery cell production, and strategic adjustments in response to potential political changes. Here are the key takeaways.

Energy storage achievements and growth

Tesla's energy storage segment saw record deployments in Q2, achieving 9.4 GWh of total storage deployments, driven by the success of both Megapack and Powerwall products. The company's non-automotive business is becoming increasingly profitable, with energy storage products contributing significantly to revenue and gross profit.

Tesla Megapacks at Plus Power's 1-GWH Sierra Estrella site. TESLA

The Lathrop Megafactory achieved a production record in Q2, while the Shanghai Megafactory remains on track to start production in Q1 2025. Despite the challenges of global deployment logistics, Tesla expects sequential growth in production, with fluctuations in deployment timing based on project milestones and delivery schedules.

Tesla CEO Elon Musk emphasized the enormous demand for grid storage, highlighting the potential for power plants to operate at steady state and produce two to three times more energy with the addition of battery packs. "I think people don't understand just how much demand there will be for grid storage," Musk said. "They are underestimating this demand by probably orders of magnitude."

4680 battery cell production

The 4680 battery cell, first announced in 2020, has faced challenges in achieving the promised lower cost, increased range, and faster charging. Although production has ramped up to the gigawatt-hour scale, it remains below Tesla's initial targets, and the cells are currently only used in the Cybertruck. Reporting from just a week ago has suggested that Elon Musk has given Tesla’s 4680 team a deadline to resolve existing issues by the end of the year or consider abandoning the project.

Musk has tasked the team with reducing costs and scaling up the dry coating process for the cathode, a key innovation that has proven difficult to implement. "In May, Musk told the team working on the 4680...to cut its cost and scale up one of its key innovations by the end of the year," according to sources who spoke to website The Information. If these issues are not resolved, Tesla may reconsider its commitment to the 4680 cell, the report said.

But in the Q2 earnings call, all of the 4680 news was positive: Tesla made significant strides in 4680 battery cell production, the company reported, achieving a 51% increase in production compared to Q1. The company is now producing over 1,400 Cybertruck cells per week and continues to reduce the cost of goods sold (COGS). Tesla's first validation Cybertruck, equipped with in-house dry cathode 4680 cells, marks a major technical milestone and is expected to achieve significant cost reductions once ramped.

Strategic planning  around a possible Trump victory in November

Tesla's strategic planning includes a cautious approach to new investments, particularly in light of potential political changes. Elon Musk stated that the company has paused its Giga Mexico project due to concerns about potential tariffs on vehicles produced in Mexico if Donald Trump is re-elected to the US Presidency in November. "Trump has said that he will put heavy tariffs on vehicles produced in Mexico," Musk explained. "So, it doesn't make sense to invest a lot in Mexico if that is going to be the case."

Instead, Tesla is focusing on increasing capacity at existing factories, with plans to produce the Cybertaxi or Robotaxi at Giga Texas.

Then-US President Donald Trump greets Tesla CEO Elon Musk as Steve Bannon (L) watches at the White House in 2017. Musk now says Tesla is strategizing about the impacts of a 2nd Trump presidency. BRENDAN SMIALOWSKI/AFP via Getty Images

A casualty of a second Trump administration could well be the Inflation Reduction Act (IRA), which Trump has denigrated for years. Five Tesla EVs were eligible for the IRA’s $7,500 tax credit in 2024: Model X Dual Motor AWD; Model 3 Performance; Model Y RWD; Model Y LR; and Model Y Performance.

Regarding the potential impact of the loss of the IRA, Musk was sanguine. He acknowledged that while Tesla might face some short-term challenges, the company is well-positioned to weather such changes. "I think it would be devastating for our competitors, but it would hurt Tesla slightly," Musk said. "Long-term, it probably actually helps Tesla."

CFO Vaibhav Taneja added that Tesla has always modeled its business to grow sustainably without relying on subsidies, ensuring long-term resilience. "We've always been looking at our business whether or not IRA is there, and we want our business to grow healthy without having any subsidies coming in," Taneja said.

In conclusion, Tesla's Q2 2024 earnings report showcases the company's continued growth and innovation in energy storage and battery cell production—even when EV sales languish. The battery industry will be watching closely as Tesla continues to push the boundaries of energy storage and electric vehicle technology (along with robotaxis, robots, and AI products).