Trump’s new tariffs on China have simply kneecapped Tesla’s solely rising enterprise: power storage, which makes use of battery cells from China.
Tesla launched its supply outcomes for Q1 2025 yesterday, which had been fairly disastrous. At 336,000 electrical car deliveries, they had been 40,000 models under the consensus and about 20,000 models under what even essentially the most pessimistic analysts anticipated.
However there was one silver lining: Tesla reported having deployed 10 GWh of power storage – a brand new document for a primary quarter.
Whereas Tesla’s electrical car enterprise entered a downturn in 2024, which is now accelerating in 2025, Tesla’s power enterprise, which primarily consists of promoting Megapacks and Powerwalls, has been constantly rising.
The majority of this development could 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 power storage programs in California and Nevada.
In keeping with the newest 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 scale back the market.
The Biden administration had already introduced a rise to 25% tariffs on Chinese language battery cells meant for power 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 prime of one another, which might imply 54% for items coming from China.
The corporate is believed to virtually completely use LFP battery cells from China’s CATL in its stationary power storage merchandise.
With the upcoming adjustments in 2026, Tesla was doubtless making ready for the change. Final 12 months, there have been rumors that Tesla was trying to set up a LFP battery plant within the US in partnership with CATL, however the plans have but to materialize.
Tesla has additionally not too long ago began manufacturing at a brand new Megafactory in Shanghai to supply the Megapack. The battery programs popping out of that plant are anticipated to be shipped to markets outdoors of the US and will allow Tesla to remain aggressive outdoors 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 not too long ago unveiled merchandise to compete with the Megapack.
Tesla has additionally not too long ago introduced plans to construct a second Megafactory within the US to construct extra Megapacks, however it’s not clear how these plans are going to be affected by the brand new tariffs.
Electrek’s Take
Since final 12 months, stationary power 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 buyer facet, we not too long ago reported that Tesla’s model points additionally prolong to the Powerwall.
Now, Tesla has to fret about tariffs considerably growing the value of its Megapacks and Powerwalls in its greatest market: the US.
There’s an opportunity that Tesla has accrued some stock in anticipation of the tariffs, however until they’re eliminated, which isn’t unimaginable contemplating how unstable the administration has been about implementing its promised tariffs, it would lead to large Megapack and Powerwall value will increase.
