Tesla's Battery Business Profits In Its First Quarter, Elon Musk Says

Competitor AES Announces Global Expansion
The battery division of Tesla Motors Co. turned a profit in its first quarter shipping Powerwall and Powerpack batteries from the company's Nevada Gigafactory, Tesla CEO Elon Musk said today.
"Even during this initial product launch, Tesla Energy achieved positive gross margin for the quarter," Musk said in a shareholder letter released today. "We are on track for a steady increase in gross margins throughout the year as volumes ramp up and costs reduce, allowing a positive cash contribution to Tesla overall even with rapid growth."
Profits from the sales of Powerwalls and Powerpacks helped offset losses from Tesla's declining sales of automotive powertrain components to Toyota and Mercedes.
Battery "production is on track, we feel really good about that," said J.B Straubel, Tesla's chief technology officer, in a followup call with analysts. "Production started off as planned in the Gigafactory in Q4. Deliveries are on track. We're starting shipments of Powerwalls and Powerpacks worldwide. We're growing out the sales operations and sales teams around the world, so from an execution point of view, I think we feel really good with where we're at."
Initial sales have been concentrated in Australia and Germany.
"In our first main markets, Australia and Germany, we have seen Tesla Energy inbound sales leads quickly exceeding vehicle sales leads, more than doubling our total potential Tesla customer inquiries," Musk writes in the shareholder letter. "We are excited about the potential growth in vehicle sales this new energy customer base could also represent."
Asked if Tesla was on track to meet his predicted $400-$500 million in battery sales this year, Musk reiterated his view that the energy storage market is "staggeringly gigantic," but said it's difficult to predict exactly when sales will blossom:
"We do see this being a very enormous market. It’s an exponential growth market. Exactly where the calendar falls on that sort of S-curve exponential makes quite a bit of difference on revenue. It will be heavily weighted to the fourth quarter."
Tesla's shareholder letter describes fourth quarter 2015 revenues of $1.1 billion for the company's automotive business and $97.4 million for "services and other," a category that includes Tesla Energy products, powertrain sales, service revenue, and sales of used Tesla vehicles.
A major competitor in energy storage, AES Corporation, announced its own expansion plans yesterday, revealing partnerships with Mitsubishi and Eaton Corporation to offer its Advancion energy storage systems in Asia, Oceania, Europe and the Middle East.
Tesla rattled the battery industry last spring with the groundbreaking low price of its utility-scale Powerpack battery. AES is marketing Advancion as the experienced alternative:
"Advancion is the most proven energy storage solution available and incorporates lessons learned from more than eight years of operations of large-scale, grid-connected battery systems," the company said in a press release. "Advancion 4, the latest design introduced in November 2015, has an industry-leading compact footprint, optimized design and a patented distributed control system that enable customers to maximize revenue, reduce operating costs, and meet the highest levels of system reliability."