COGS (battery cost) for Megapack will decrease. Demand for Megapack is quasi-infinite. So if supply is finite, costs to manufacturer go down, and demand approaches infinity...how do you figure margins don't stay high?
This is the sort of dangerous assumptions that got TSLA investors into trouble in 2021 - 2022 when share price assumed massive automotive margins would be maintained with volume expansion.
Demand is
not infinite. If demand was infinite right now, Tesla would be able to sell megapacks from much, much higher prices than 25-30% gross margins.
Tesla has
already cut prices on the megapack (though not much).
Right now, only the places with the highest energy costs or motivations to buy these systems (1st world countries with unstable grids like Australia, Hawaii...) are paying these prices. The economics don't work for most of the populations to pay these prices. That's fine.
Megapacks are a solid business. But please be practical. Tesla is producing 20 GWh annualized right now. When that goes up to 40, then 60-80...there will be price cuts.
Just like in automotive.
COGs will go down some, but not outpace the price cuts.
Just like in automotive.
Unlike in automotive, competitors will keep upping their production of Megapack competitors increasing market supply.
Demand pressure might allow Tesla to keep solid margins, but it is entirely impractical to expect them to go up with volume increases.
For 20 - 60 GWh annualized production over next 3 years we can probably assume 25-30% gross margins, but after that expect them to move down to 20%.
10% operating margin on 200 GWh annualized production (in 5 years maybe?) at $300 / kWh ASP (though probably will be lower) would yield 6 billion in operating profit, e.g. something like $1.8 in EPS. That's nice, but only worth like 100 billion in market cap.