Tesla’s Energy Generation and Storage Business May Suffer From Trump’s Tariffs

Tesla’s first-quarter earnings showed a significant decline in profits. Yet, one shining spot in the report was the EV manufacturer’s energy generation and storage segment.

Up a substantial 67% compared to the same period last year, Tesla’s Megapack and Powerwall battery systems earned $2.73 billion in Q1 2025. While lucrative for the company, this business unit may have a rocky future.

According to CFO Vaibhav Taneja, the recent tariff policy implemented by the Trump Administration will have an adverse impact on the whole company. Yet, it’s the high duty fees on components from China that may have a more dire effect on Tesla’s energy generation and storage business.

The company’s Megapacks and Powerwalls are assembled in America. However, Elon Musk’s business must rely on components made in China to complete the manufacturing process. As such, the automaker must pay high tariff charges to get the parts into the U.S., which adds production delays and financial pressure to Tesla’s bottom line.

“The impact of tariffs on the energy business will be outsized since we source LFP battery cells from China,” said Taneja, per Business Insider.

To get around the higher tariffs, Taneja said the EV maker is actively seeking partnerships outside of China for components currently unavailable in the U.S. Yet, the executive admits that “it will take time” as China currently leads the world in battery manufacturing. 

While Tesla’s energy generation and storage business showed some impressive figures in the first quarter of 2025, the potential effect of tariffs may reflect in the second quarter. Meanwhile, the rest of the earnings report did not bode well for investors.

Tesla’s Q1 2025 Earnings and Outlook

Companywide earnings dropped 9.4% in the last quarter. Profits were down also, falling 71% to $409 million from the $1.39 billion earned the year prior.

Tesla’s Model Y and Model 3 deliveries were also down, plunging 16%. For “other models,” which includes the Cybertruck, deliveries sank 24%.

Tesla’s outlook for the rest of 2025 remains vague. In the report, the company noted that it’s “difficult to measure” how current trade policy, changing costs, and shifting demand will affect the automotive and energy supply markets. Even though the automaker said it’s “making prudent investments,” there are a multitude of factors that will influence the rate of growth.

“We will revisit our 2025 guidance in our Q2 update,” Tesla stated.