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How Tesla’s Energy Generation and Storage Segment Performed in Q1

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Energy Generation and Storage segment

In the last few quarters, Tesla (TSLA) has kept its focus on increasing Model 3 production at a fast pace. Due to its focus on the Model 3, the company has found it difficult to keep balance in the Automotive segment’s and Energy Generation and Storage segment’s growths.

Nonetheless, TSLA managed to nearly triple its energy storage deployments in 2018 compared to 2017, in line with its expectations. Let’s take a closer look at Tesla’s Energy Generation and Storage segment’s performance in the first quarter of 2019.

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Energy Generation and Storage segment’s revenue

During its fourth-quarter earnings event, Tesla said that a newly built production line at its Nevada-based Gigafactory was helping it boost its Powerwall and Powerpack production, and it expected its Energy Generation and Storage segment’s revenue to rise significantly in 2019.

However, the segment’s revenue stood at $325 million in the first quarter, 12.6% lower than its level of $371 million in the fourth quarter and 20.8% lower than its level of $410 million in the first quarter of 2018.

Gross margin contracted sharply

In the first quarter, Tesla’s Energy Generation and Storage segment’s gross margin contracted sharply to just 2.4% from 11.5% in the fourth quarter and 17.2% in the third quarter of 2018. About a year ago, the segment’s gross margin was also higher at 8.5%.

The company attributed the decline in the segment’s margin to reduced volumes in the solar retrofit business.

2019 outlook

In its first-quarter earnings report, Tesla reiterated its expectation of a significant increase in the Energy Generation and Storage segment’s revenue in 2019.

Expected retrofit solar deployment growth in the second half of the year and an increase in Powerwall and commercial storage product production are likely to help Tesla boost its Energy Generation and Storage segment’s revenue.

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