The company had strong year-over-year growth deploying its Powerwall batteries, but its rooftop solar division continues to retract.

The Tesla Energy business unit is shifting focus, with Q2 year-over-year solar deployments down 38%, and energy storage deployments up 222%. 

Tesla posted these results in its Q2, 2023 earnings call. The company reported total generation and storage revenues increasing 74% year-over-year to $1.509 billion, which is 6.1% of Tesla’s total revenue. 

In Q2, it deployed 66 MW of solar and 3.65 GWh of energy storage, with average duration of a Powerwall rated for a duration of about three hours. Year-to-date, Tesla energy storage deployments are 7.54 GWh, up 281% year-over-year. 

Tesla’s battery business is set to grow further as the company is making progress on its first California-based Megapack factory, slated to produce 40 GWh of grid-scale stationary batteries per year when complete. The company also recently announced it plans to start building a new Shanghai-based Megapack factory in the third quarter of 2023, with operations to commence in the second quarter of 2024. The factory will potentially add another 40 GWh of manufacturing capacity. 

(Read: “Tesla Master Plan projects 3 TW of solar and 6.5 TWh of storage in U.S.”) 

Tesla’s slump in solar installations may be a sign of a sluggish residential solar market. The company said the dip in solar sales was predominantly due to a high interest rate environment that is postponing customer purchases industry-wide. Deployments were relatively flat quarter-to-quarter this year. 

Solar deployments slowed to 66 MW this quarter, down from a hot Q2 of 106 MW in 2022. For the first half of this year, deployments total 133 MW versus 154 MW last year. Tesla’s solar division has been slipping in share, dropping considerably from its peak quarter of 176 MW in Q2 2017. 

For Tesla’s total business, the company delivered just under $25 billion in revenues, reaching an earnings per share of $0.91. Gross margins are down slightly to 18.2%, down from 19.3% in the previous quarter. The company posted an operating margin of 9.6% and added about $700 million in cash and investments, which now totals over $23 billion.

“We are focusing on cost reduction, new product development that will enable future growth, investments in R&D, better vehicle financing options, continuous product improvement and generation of free cash flow,” said the earnings report. “The challenges of these uncertain times are not over, but we believe we have the right ingredients for the long-term success of the business through a variety of high potential projects.”

Tesla stock fell about 10% on the day following the Q2 earnings call. Full earnings reports can be found here.