Trump’s new tariffs on China have simply kneecapped Tesla’s solely rising enterprise: vitality storage, which makes use of battery cells from China.
Tesla launched its supply outcomes for Q1 2025 yesterday, which have been fairly disastrous. At 336,000 electrical car deliveries, they have been 40,000 models beneath the consensus and about 20,000 models beneath what even essentially the most pessimistic analysts anticipated.
However there was one silver lining: Tesla reported having deployed 10 GWh of vitality storage – a brand new file for a primary quarter.
Whereas Tesla’s electrical car enterprise entered a downturn in 2024, which is now accelerating in 2025, Tesla’s vitality enterprise, which primarily consists of promoting Megapacks and Powerwalls, has been constantly rising.
The majority of this progress may be attributed to Tesla’s manufacturing ramp at its Lathrop Megafactory, the place it produces the Megapack, and within the launch and manufacturing ramp of the Powerwall 3 with LFP battery cells.
Tesla now makes use of LFP battery cells from China to construct these vitality storage methods in California and Nevada.
Based on the most recent data, President Trump’s new tariffs introduced yesterday are leading to 54% tariffs on importing Chinese language battery cells into the US.
It will considerably improve the costs of Tesla’s Powerwall and Megapack merchandise, which ought to cut back the market.
The Biden administration had already introduced a rise to 25% tariffs on Chinese language battery cells meant for vitality storage, coming in 2026.
Tesla was already bracing for the brand new tariff, however the Trump administration has dramatically accelerated the timeline and elevated the tariffs. The administration has confirmed that the tariffs are stacking up on high of one another, which might imply 54% for items coming from China.
The corporate is believed to nearly completely use LFP battery cells from China’s CATL in its stationary vitality storage merchandise.
With the upcoming modifications in 2026, Tesla was doubtless getting ready for the change. Final yr, there have been rumors that Tesla was seeking to set up a LFP battery plant within the US in partnership with CATL, however the plans have but to materialize.
Tesla has additionally lately began manufacturing at a brand new Megafactory in Shanghai to supply the Megapack. The battery methods popping out of that plant are anticipated to be shipped to markets exterior of the US and will allow Tesla to remain aggressive exterior the US.
Though, as we beforehand reported, Tesla is beginning to face intense competitors from its personal battery suppliers for these merchandise, CATL and BYD, which have each lately unveiled merchandise to compete with the Megapack.
Tesla has additionally lately introduced plans to construct a second Megafactory within the US to construct extra Megapacks, but it surely’s not clear how these plans are going to be affected by the brand new tariffs.
Electrek’s Take
Since final yr, stationary vitality storage has been Tesla’s solely rising enterprise unit, and I used to be already fearful about it due to elevated competitors. BYD and CATL have already got a maintain on LFP cells going into the Megapack, and now they’re making their very own Megapack merchandise with their very own cells.
On the patron aspect, we lately reported that Tesla’s model points additionally prolong to the Powerwall.
Now, Tesla has to fret about tariffs considerably rising the value of its Megapacks and Powerwalls in its greatest market: the US.
There’s an opportunity that Tesla has collected some stock in anticipation of the tariffs, however except they’re eliminated, which isn’t inconceivable contemplating how risky the administration has been about implementing its promised tariffs, it’ll lead to large Megapack and Powerwall worth will increase.
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