When it comes to electric vehicles (EVs), Tesla (NASDAQ: TSLA) is likely the first name that comes to mind. While Tesla is renowned for its vehicle lineup and customer service, its business extends far beyond being an automaker. With ventures into autonomous taxis and energy storage solutions, Tesla is positioning itself as a tech powerhouse. Let’s explore Tesla’s key business areas and recent highlights.
Tesla Business Segment Breakdown
| Q3 2024 Total Revenue by Segment | Share |
|---|---|
| Automotive Sales | 74.8% |
| Services & Others (Repairs, Charging Stations, etc.) | 11.1% |
| Energy Generation & Storage | 9.4% |
| Regulatory Credits | 2.9% |
| Automotive Leasing | 1.8% |
Below, we examine Tesla’s key business segments: Automotive, Energy & Storage, and Regulatory Credits.
Segment 1: Automotive Business
| Model | Market Position |
|---|---|
| Model 3 | Mid-sized sedan |
| Model S | Luxury sedan |
| Model Y | Mid-sized SUV |
| Model X | Luxury SUV |
Tesla’s core business revolves around the manufacturing and sales of EVs, accounting for over 85% of its revenue (including services). Unlike traditional automakers relying on dealerships, Tesla uses a direct sales model via company-owned stores, showrooms, and online channels. This approach enhances demand tracking, streamlines production planning, and eliminates dealer markups, boosting profitability.
Tesla also develops its proprietary Full Self-Driving (FSD) technology, currently classified as Level 2 driver assistance. Future updates aim to achieve Level 3 partial autonomy. Leveraging Over-The-Air (OTA) updates, Tesla enables existing customers to upgrade their FSD capabilities without replacing hardware.
Tesla’s FSD Technology
Tesla’s Full Self-Driving (FSD) system employs cameras and artificial intelligence for environmental awareness. The latest HW4.0 hardware reintroduces millimeter-wave radar to enhance perception under challenging conditions.
Segment 2: Energy & Storage
About 10% of Tesla’s revenue stems from its energy-related businesses, primarily split between two products: Powerwall and Megapack.
- Powerwall: A home battery system for storing solar energy and providing backup power during outages or peak hours, reducing energy costs.
- Megapack: A large-scale battery solution for utilities and enterprises, designed to balance grid demands, integrate renewable energy, and support microgrid development.
Tesla has significantly ramped up Megapack production at its Shanghai factory, making this one of its fastest-growing segments. As capacity scales, this division is expected to contribute more meaningfully to Tesla’s overall revenue.
Segment 3: Regulatory Credits
Roughly 3% of Tesla’s revenue comes from Regulatory Credits, earned by producing zero-emission vehicles. Tesla sells excess credits to automakers failing to meet regulatory requirements, generating nearly 100% gross margins in this segment.
Comparison: Regulatory Credits vs. Carbon Credits
| Aspect | Regulatory Credits | Carbon Credits |
|---|---|---|
| Recipients | Low-carbon product producers | Low-carbon product users/consumers |
| Revenue Source | Sold to non-compliant companies to offset shortfalls | Traded in carbon markets or for offset commitments |
| Example | Tesla selling credits to traditional automakers | Companies trading carbon offsets |
Recent Business Highlights
1. Cybercab
Tesla is developing Cybercab, a fully autonomous (Level 4–5) taxi service. Engineers revealed that Cybercab uses half the components of Model 3, with a price point under $30,000. Lower costs and tax incentives have bolstered market optimism for this innovation.
With its existing customer base and FSD capabilities, Tesla could create a revenue-sharing model for owners using Cybercab, offering a competitive edge over rivals like Uber and Waymo.
Estimated at $0.40 per mile, Cybercab’s operating cost is significantly lower than traditional taxis, although challenges remain in advancing autonomous technology and meeting regulatory requirements.
2. Model Q
Expected in H1 2025, the Model Q is a budget-friendly EV priced around $30,000, targeting broader market segments. Positioned below the Model 3, it aims to boost Tesla’s market share in untapped regions. However, investors are closely watching how this may affect Tesla’s margins.
3. Optimus
Tesla’s Optimus is a humanoid robot designed as a versatile assistant for home and business use. Priced between $20,000 and $30,000, it aims to undercut competitors in the service robot market.
- Optimus has been tested in Tesla’s factories for basic tasks like carrying items and performing simple actions.
- The robot represents Tesla’s expansion into robotics but faces challenges in production, cost control, and market adoption.
While Optimus could become a long-term growth driver, its near-term impact on revenue is expected to be limited.
Conclusion
Tesla’s diverse business model spans EVs, energy storage, and emerging technologies like autonomous taxis and robotics. These innovations highlight its ambition to lead not just in mobility but across various tech-driven industries.
As Tesla continues to innovate and expand, investors should monitor its profit margins, regulatory developments, and emerging products like Cybercab and Optimus, which could shape its future growth trajectory.
