Tesla is now making significant strides in the energy storage sector, expanding its battery production capabilities in Sparks, Nevada, and doubling the capacity of its existing battery factory in Lathrop, California, according to BNN Bloomberg.
This strategic move involves utilizing idle equipment from China's Contemporary Amperex Technology Co. Ltd. (CATL), a leading battery manufacturer. This expansion is part of Tesla's broader effort to onshore the supply chain for lithium-iron-phosphate (LFP) cells in the United States, thereby enhancing its production autonomy and reducing dependence on overseas suppliers.
Tesla's Independent Control and Strategic Planning
In a notable departure from typical industry partnerships, Tesla plans to purchase machinery from CATL and install it at the Sparks facility. Tesla will maintain full control of the operation and cover all associated costs. CATL's role is limited to assisting with equipment setup, marking minimal involvement from the Chinese company. The new facility will focus on producing cells for Tesla’s large-battery Megapack product, which is designed for utility-scale energy storage applications.
Tesla's expansion in Nevada comes during heightened scrutiny by U.S. lawmakers and the Biden administration over technology collaborations with China, especially in sectors like battery production. By minimizing CATL's involvement in the new facility, Tesla aims to address concerns about U.S. companies' dependence on Chinese partnerships and aligns with the national policy of reducing technological dependencies.
Doubling Down: Tesla's Lathrop Factory Expansion
In addition to the new facility in Nevada, Tesla plans to double the capacity of its existing battery factory in Lathrop, California. The expansion of the Lathrop factory and the addition of the new Nevada facility underscores Tesla's commitment to scaling up its energy storage capabilities.
This move aligns with Elon Musk's assertion during last week's earnings call, “I said for many years that the storage business would grow much faster than the car business, and it is doing that.’ He also stated that Tesla’s energy storage business delivered nearly 15 gigawatt hours of batteries in 2023, compared to 6.5 gigawatt hours the year before. “So tremendous year-over-year growth, triple-digits. And yeah, I think we'll continue to see robust growth in storage, as predicted."
Commitment to Supplier Collaboration and Growth
Karn Budhiraj, Vice President of Global Supply Management, shared insights on the company's plans during the earnings call: "Megapack continues to see strong demand signals globally, driving consistent growth trajectory through '24 and '25. We want to thank all of our partners who've put their trust in the Megapack team to execute critical infrastructure worldwide. And I would like to personally thank the Megapack engineering and production teams for their strong 2023 execution. Lathrop continues to ramp through 2024 with the operation of a second final assembly line to double capacity from 20 gigawatts to 40 gigawatt hours by the end of the year."
Elon Musk also emphasized the importance of Tesla's suppliers in this growth, "But we also do want to emphasize that we also expect to ramp orders from our suppliers. So this is not about replacing our suppliers, it's about supplementing our suppliers. So we are very appreciative of our suppliers. Panasonic, obviously, is our longest supplier. They're an amazing company. We've got CATL, we've got LG, and BYD."
The new Nevada facility, expected to become operational by 2025, will start with an initial output of approximately 10 gigawatt-hours (GWh). Plans are in place to expand the facility, contingent upon the project's smooth progression and establishing a stable supply chain. Once fully operational, the Nevada facility could contribute significantly to Tesla's overall battery production capacity in the region, potentially accounting for about 20% of the production, including the output from the Lathrop location.
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In this article, we’ll cover Tesla’s updates on Optimus, batteries, and Tesla Energy.
Optimus
Tesla has been working away on their humanoid robot and continues to make progress in software and hardware.
First, Tesla is preparing the Fremont factory for the Optimus pilot production line, which is scheduled for completion later this year. Once it is, wider deployments of Optimus for internal use within Tesla’s facilities are expected as well. Tesla aims to have several thousand Optimus units working in its North American factories by the end of the year once the pilot production line is operational.
Tesla’s goals for production remain extremely lofty - 1 million units per year by 2030. However, they could face some challenges when ramping production.
Key components like the shoulder actuators use specialized permanent and rare-earth magnets, which are currently sourced from China. Due to recent Chinese restrictions on the overseas sale of these magnets, Tesla is seeking an exemption or alternative suppliers. They have not yet looked into modifying the shoulder actuator but will likely do so if they cannot obtain the necessary materials.
Batteries
Batteries are another item that Tesla’s teams have been working on behind the scenes for years now. The second generation of the 4680 - the Cybercell - has been IRA-compliant for some time now. This means that the Cybertruck is eligible for the US Federal EV rebate.
Tesla also achieved the lowest cost-per-kWh of any of its cells with the 4680 battery - and it is potentially one of the cheapest cells being manufactured by any vehicle battery manufacturer at this point. With dry-cathode still being worked on, Tesla may be able to squeeze more optimizations and cost efficiencies from the 4680 cells.
Additionally, Tesla is progressing with its plans for lithium refining and cathode production in the US, both of which are scheduled to commence in 2025. While the company says they’re no longer supply-constrained for non-LFP vehicle batteries, on-shoring production and sourcing critical minerals from nations outside of China will be key.
LFP batteries continue to be supply-constrained, namely for the Tesla Energy division. LFP batteries and their materials are sourced from China. Due to tariffs and limited exports, Tesla can’t obtain enough and is considering potentially building an LFP production facility in North America.
Energy
Tesla’s energy division is still experiencing some of the highest growth of any of its divisions. Year over year, Tesla saw a 154% increase in energy storage deployments, including both Megapack and Powerwall - for a total of 10.4 GWh deployed in just Q1 2025. While deliveries in energy storage remain volatile due to the nature of Megapack installations, Tesla expects growth to continue rapidly in this segment.
Tesla also deployed 1GWh of Powerwall 3 residential storage this quarter, marking its strongest quarter. Powerwall 3 has received positive feedback from customers, many of whom appreciate its new capabilities with its built-in inverter for solar.
Megapack is continuing to see demand increases, currently highlighted by utility-scale Megapack systems, as well as data centers requiring stable power delivery. Megafactory Shanghai is also online now and producing Megapacks - with an annual production capacity of 20GWh today and up to 40GWh in the future. The site has also produced over 100 Megapacks this quarter, which are all awaiting delivery.
There was a lot of interesting news from Tesla’s Q1 2025 Earnings Call, covering everything from FSD and Robotaxi - to the less glamorous but equally important Megapack and Powerwall.
Tesla is heavily leaning into artificial intelligence, and its insurance offering is just another example of how it’s improving its product or lowering costs by leveraging AI.
Tesla recently started offering an insurance discount in select states when drivers use FSD for at least 50% of their drives and now it’s introducing an AI to help handle customer claims.
Tesla has developed an in-house voiced AI agent that can assist customers in handling simple support requests for Tesla Insurance.
For customers calling in from those states, the new AI agent provides a unique way to address the most common support calls. And it’s not just answering common questions but actually making requested changes to the owner’s account.
Policy Changes
The first key item is that it automates policy changes. Simple policy updates, including adjusting your deductible or coverage limits, are now done via AI. For policyholders who are simply looking to make quick changes and don’t have any questions, this makes the process a lot quicker by not having to wait for a representative. Tesla isn’t eliminating representatives, but this could reduce the number of representatives required or reduce wait times.
Continue Where You Left Off
The second item here, highlighted by Raj Jegannathan from Tesla’s internal IT team, is that Tesla’s AI agent is able to offer summaries of the user’s last interaction with Tesla Insurance. It will summarize your last interaction and provide assistance on that particular topic if you need to continue it. That means that you don’t have to wait for a human to review your file - the AI will kick off right where you left off.
Tesla appears to be focused on improving efficiency and making support more accessible. While actual items like claims are left up to humans due to their inherently complex nature, this helps free up employees to handle more complex items. While there’s no doubt Tesla will continue to develop this AI like they do everything else, we may soon see it take on even more tasks.
More AI
This isn’t the first AI agent that Tesla has demoed - there is now a chat-based AI sales agent available on the front page of Tesla’s website, which is able to answer common questions on Tesla vehicles.
Tesla has also been improving their AI support tool available in the Tesla App is able to provide feedback on common issues and also guide users towards either solving the problem or placing a support request.
Tesla’s strategy here is to influence the cost-heavy areas associated with having humans address simple requests and instead leverage AI, which can offer instant answers and reduce support costs.
Roll Out to More States
While this new AI is currently limited to just 12 states, it is likely to follow Tesla Insurance’s expansion. Insurance seems to have been at a bit of a standstill lately. Tesla continues to improve features such as the improvements to Safety Score V2.2, but we haven’t seen Tesla roll out support to new states since it added Minnesota in November of 2022.
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