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Tesla (Nasdaq: TSLA) has reportedly inked a massive $557 million energy storage station deal with Shanghai authorities, marking the electric vehicle giant’s first grid-scale battery storage project in China.

The agreement, signed Friday between Tesla, China Kangfu International Leasing Co, and the Shanghai government, involves a 4 billion yuan investment and will utilize Tesla’s Megapack batteries for large-scale energy infrastructure.

This landmark deal comes as Tesla’s energy division experiences explosive triple-digit growth, transforming from a side project into what analysts are calling the company’s next major growth engine.

Tesla’s Energy Business Emerges as Hidden Growth Driver

While Tesla’s automotive division captures most investor attention, the company’s energy storage business is quietly delivering extraordinary results that could reshape its growth trajectory.

Tesla’s energy division more than doubled its storage deployments in 2024, with total energy generation and storage revenue jumping 67% year-over-year to over $10 billion. The division deployed 31.4 gigawatt hours (GWh) of storage in 2024, more than doubling the 14.7 GWh deployed in 2023, demonstrating exceptional product-market fit in a rapidly expanding sector.

The profitability transformation has been equally impressive, with energy segment gross profit reaching $2.6 billion last year compared to just $1.1 billion in 2023 and less than $300 million in 2022. Tesla’s momentum stems largely from its Megapack product, a grid-scale battery storage solution designed for utilities and large commercial customers, which the company now produces at its dedicated Lathrop, California facility and recently launched Shanghai factory.

The Shanghai Megafactory, which began trial production in December 2024 and officially started mass production in February 2025, targets annual output of 10,000 Megapack units equivalent to 40 GWh of capacity.

Tesla’s energy business is benefiting significantly from rising demand for artificial intelligence infrastructure, which requires stable power sources to support data centers and computing facilities.

As CEO commentary indicated in the first-quarter update, AI infrastructure is driving rapid load growth and creating outsized opportunities for energy storage products to stabilize grids and provide additional power capacity when needed most.

Tesla Shares Continue to Show Positive Momentum in Recent Trading Sessions

Tesla shares are showing positive momentum following the Shanghai energy deal announcement, with the stock trading at $327.55 in premarket activity, up $5.50 or 1.71% from the previous close of $322.05. The premarket action timestamp shows trading at 8:11-14 AM EDT, reflecting investor optimism about Tesla’s expanding energy business footprint in the world’s largest energy storage market. Tesla’s stock has demonstrated resilience with a current market capitalization of $1.0 trillion and a 52-week trading range of $179.66 to $488.54.

Key financial metrics highlight Tesla’s strong positioning, including a gross margin of 17.66% and significant trading volume of over 1.2 million shares. The company’s PE ratio of 185.09 reflects high growth expectations, while its beta of 2.48 indicates higher volatility compared to broader market indices.

Tesla’s 1-year target estimate of $301.36 suggests analysts see continued growth potential, though the energy business expansion could drive upward revisions as this segment gains recognition as a major value driver.

The Shanghai deal represents a strategic milestone that could accelerate Tesla’s energy business growth trajectory, particularly as the company faces increasing competition and pricing pressures in its core automotive market.

With Tesla’s energy division already on pace for another record-breaking year based on first-quarter 2025 results, this Chinese market entry through the Shanghai project positions the company to capture significant share in the world’s fastest-growing energy storage market while leveraging its local manufacturing capabilities.

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