One of the few bright spots of Tesla’s dire earnings is now in the crosshairs of Trump’s tariffs.
The EV maker’s energy generation and storage business, which includes Tesla’s Megapack and Powerwall battery systems, brought in $2.73 billion in the first three months of 2025, up 67% from last year.
Those strong numbers put a gloss on what was otherwise a very underwhelming set of results.
Tesla’s net income plummeted to $409 million from nearly $1.4 billion in the same period last year, well below Wall Street’s expectations.
Revenues from its car business fell 20% as the company’s sales collapsed across the globe amid a wave of Elon Musk-fuelled protests and vandalism.
“Looks like energy storage saved some pretty dismal numbers from Tesla,” wrote Tesla investor Ross Gerber in a post on X.
However, Tesla’s lucrative side hustle faces a serious speedbump in the form of the escalating trade war between the US and China.
Speaking on an analyst call after the earnings, Tesla’s CFO, Vaibhav Taneja, said that while the Trump administration’s tariffs will hit the company on auto parts, the effect on Tesla’s energy storage business from the tariffs on China will be more severe.
“The impact of tariffs on the energy business will be outsized since we source LFP battery cells from China,” said Taneja.
Although Tesla makes Megapacks and Powerwalls at its factories in California and Nevada, the company imports the battery cell components for these systems from China, which dominates the global battery manufacturing industry.
Taneja added that Tesla was attempting to set up the manufacturing of lithium-iron phosphate batteries in the US to get around the tariffs, but was facing a shortage of manufacturing equipment.
“We’ve also been working on securing additional supply chain from non-China-based suppliers, but it will take time,” said Taneja.
Tesla faces fewer headwinds from the tariffs than other automakers, as it has sought to localize production of its cars and energy systems in the markets it sells them in.
The company recently began Megapack production at a new factory in Shanghai near the gigafactory that produces its Chinese EVs.
Despite this, Elon Musk has warned the auto tariffs introduced by Trump will have a “significant” impact on Tesla.
The billionaire, who said on Tuesday he would step back from his cost-cutting role in the Trump administration, told investors that he would “continue to advocate” for lower tariffs — but said that Trump ultimately called the shots.
“I made my opinion clear to the president, and other people made their opinion clear to the president,” said Musk.
“I’m hopeful that the president will observe whether my predictions are more accurate than the predictions of others and perhaps weigh my advice differently in the future. We shall see,” he added.
